HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2020Town of Hillsborough
North Carolina
Comprehensive Annual Financial Report
For Fiscal year ended June 30, 2020
Presented by the Financial Services Department
Daphna Schwartz, Finance Director
Keri Carnes, Financial Analyst
Town of Hillsborough, North Carolina
Table of Contents
Introductory Section
List of Principal Officials
Organization Chart ii
Letter of Transmittal iii
GFOA Certificate of Achievement x
Financial Section
Report of Independent Auditor's 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
Notes to Financial Statements 31
Required Supplementary Financial Data
Exhibit
Law Enforcement Officers' Special Separation Allowance Required Supplementary
Information:
A Schedules of Changes in Total Pension Liability 63
Law Enforcement Officers' Special Separation Allowance Required Supplementary
Information:
B Schedules of Total Pension Liability as a Percentage of Covered Payroll 64
C Schedule of Changes in the Total OPEB Liability and Related Ratios 65
Local Government Employees' Retirement System Required Supplementary
Information:
D-1 Schedules of Proportionate Share of Net Pension Liability (Asset) 66
D-2 Schedules of Contributions 67
Town of Hillsborough, North Carolina
Supplementary Information:
Combining and Individual Fund Financial Statements Section
Schedule Governmental Funds:
1 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Fund 69
2 Combining Balance Sheet - Nonmajor Governmental Funds 74
3 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Nonmajor Governmental Funds 76
4 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Town Barn Improvements Capital Project Fund 78
5 Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and
Actual - General Capital Projects Fund — Nonmajor Capital Project Fund 79
6 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Capital Reserve Fund — Nonmajor Capital Project Fund 80
7 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Downtown Improvements Capital Project Fund - Nonmajor Capital Project
Fund 81
8 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk CMAQ Capital Project Fund - Nonmajor Capital Project Fund 82
9 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - Rail Station Capital Project Fund - Nonmajor Capital Project Fund 83
10 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Public Works Building Capital Project Fund - Nonmajor Capital Project Fund 84
11 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Public Safety Building Capital Project Fund - Nonmajor Capital Project Fund 85
Enterprise Funds:
12 Schedule of Revenues - Budget and Actual (Non-GAAP) - Water and Sewer Fund 86
13 Schedule of Expenditures - Budget and Actual (Non-GAAP) - Water and Sewer Fund 87
14 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Projects Fund 90
15 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund 91
16 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water Capital Reserve Fund 92
17 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Sewer Capital Reserve Fund 93
18 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) — WFER Carrstore Mill Creek Road Capital Project Fund 94
19 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Stormwater Fund 95
Fiduciary Fund:
20 Statement of Changes in Assets and Liabilities - Special Assessment Debt Agency
Fund 96
Other Schedules
21 Schedule of Ad Valorem Taxes Receivable 98
22 Analysis of Current Tax Levy 99
Town of Hillsborough, North Carolina
Statistical Section
Table Financial Trends Information:
1 Net Position by Component 102
2 Changes in Net Position... 104
3 Fund Balances, Governmental Funds 108
4 Changes in Fund Balance, Governmental Funds 110
Revenue Capacity Information:
5 Program Revenues by Function/Program 113
6 Tax Revenues by Source, Governmental Funds 115
7 Assessed Value and Actual Value of Taxable Property 116
8 Direct and Overlapping Property Tax Rates 117
9 Property Tax Revenue and Collections 118
10 Principal Property Taxpayers 119
11 Water Sold by Type of Customer and In and Out of Town 120
12 Water and Sewer Rates 122
Debt Capacity Information:
13 Ratios of Outstanding Debt by Type 124
14 Ratios of General Bonded Debt Outstanding 125
15 Direct and Overlapping Governmental Activities Debt 126
16 Legal Debt Margin Information 127
Demographic and Economic Information:
17 Demographic and Economic Statistics 130
18 Principal Employers 131
19 Full -Time Equivalent City Government Employees by Function/Program 132
Operating Information:
20 Operating Indicators by Function/Program 134
21 Capital Asset Statistics by Function/Program 136
Other Disclosures
Continuing Disclosure Information Related to Utility Revenue Bonds 139
Compliance Section
Independent Auditors' Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 145
Introductory Section
Town of Hillsborough Board of Commissioners 2019-2020
From left: Commissioners Robb English and Kathleen Ferguson, Mayor km] Weaver,
Commissioner Evelyn Lloyd, Mayor Pro Tem Mark Bell, and Commissioner Matt Hughes.
Jenn Weaver — Mayor
Mark Bell — Mayor Pro Tern
Evelyn Lloyd — Commissioner
Matt Hughes — Commissioner
Robb English — Commissioner
Town Officials
Eric J. Peterson, Town Manager
Daphna Schwartz, Finance Director
Emily Bradford, Budget Director
Jen Della Valle, Assistant to the Town Manager/Deputy Budget Director
Marie Strandwitz, Utilities Director
Katherine Cathey, Town Clerk/Human Resources Director
Duane Hampton, Police Chief
Margaret Hauth, Assistant Town Manager/Planning Director
Ken Hines, Public Works Director
Catherine Wright, Public Information Officer
Robert Hornik, Town Attorney
Town of Hillsborough
Organization Chart
Utilities
Administration
Budget
Public Information
Human Resources
Town Clerk
Safety & Risk Mgmt.
Information Services
— Financial Services
Accounting
Billing & Collections
Planning
Planning
Public Space
Economic
Development
_ Fire Marshal &
Emergency Mgmt.
Public Works
Streets
Solid Waste
— Cemetery
Fleet
Maintenance
Police
Administration
Patrol
_ Investigations &
Community Service
Utilities
Administration
Water Treatment
Plant
Wastewater
Treatment Plant
Water Distribution &
Wastewater
Collection
Stormwater
Town of Hillsborough, North Carolina
November 18, 2020
Honorable Mayor Weaver,
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,
2020, is submitted for your review and use. The Town, like all other local governments in the state, is required by
state law to publish a complete set of financial statements within four months of the close of each fiscal year.
Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all
disclosures, rests with the Town. As management, we assert that, to the best of our knowledge, this financial report
is complete and reliable in all material respects and is reported in a manner designed to fairly present the financial
position and results of the operations of the governmental and business -type activities. All disclosures necessary
to gain the maximum understanding of the Town's financial affairs have been included.
The Town's management is responsible for establishing and maintaining an internal control structure that is
designed to ensure the Town's assets are protected from loss, theft, or misuse, and to ensure adequate accounting
data are compiled to allow for the preparation of financial statements which conform with accounting principles
generally accepted in the United States of America (GAAP). Since the cost of internal controls should not outweigh
their benefits, the Town's internal control structure has been designed to provide reasonable rather than an 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 Cherry Bekaert LLP, a firm of licensed certified public accountants, was
selected and awarded the contract for the Fiscal Year 2020. 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.
COVID-19
Fiscal year 2020 was challenging due to the impacts of COVID-19. The Town closed its offices to the public on
March 16, 2020 and has not reopened. Many Town employees continue to work remotely. As of June 30, 2020, the
Town had expended $42,380 for COVID-19 related supplies and services. The Town received $79,973 of CARES
Act Coronavirus Relief Funds from Orange County in June 2020. On June 30, 2020, at the direction of the Board
of Commissioners, the Town distributed these funds to local government and non-profit organizations to provide
housing, food, and assistance with water and sewer utility bills to residents of the Town.
The Town suspended water and sewer service disconnections for non-payment on all accounts as of March 20,
2020. Under Governor's Executive Orders 124 and 142, public utilities were prohibited from disconnecting service
from March 31 through July 29, 2020. The Town resumed standard collection practices on August 1, 2020. All water
and sewer accounts in arrears from January 2020 to July 2020 were automatically set up on a 12 -month equal
installment payment plan. As of June 30, 2020, there were 1,883 accounts past due in the amount of $376,830.
Town of Hillsborough, North Carolina
Profile of the Government
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 7,809 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 many 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, stormwater, and cemetery. The Town provides
financial support to certain boards, agencies, and
commissions to assist their efforts in serving citizens. The
Town has evaluated its relationship with each of these entities
according to criteria established by Governmental Accounting
Standards Board Statement 14 and has determined that the
Hillsborough Tourism Development Authority and
Hillsborough Tourism Board are required to be included in the financial report.
This is Jack. He is located at the Eno River Parking Deck in
downtown Hillsborough.
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 1.58 MGD. The Town's water
system serves a total of 6,399 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 treated discharge of 0.75
MGD.
The town offers a seven -week course, The Citizen's Academy, aimed at helping citizens increase their knowledge
of town government, as well as their interest and ability in influencing and participating in town decisions. The 2020
course was canceled due to COVID-19.
Environmental Initiatives
The town government mission statement charges personnel with enhancing the quality of life for the living beings
and land within our town. Strategic objectives include conserving natural resources and expanding recreation,
walkability, and connectivity.
Below are some of the environmental initiatives of the town government.
➢ Updating and expanding the long-term visioning and planning document, the Comprehensive Plan, to
include sustainability and climate change initiatives.
➢ Orange County Climate Council member. The council was formed in 2019 by Orange County and the towns
of Carrboro, Chapel Hill, and Hillsborough as a collaborative effort among the municipal governments, the
school systems, the University of North Carolina, non-profit organizations, and residents. The council's
mission is to accelerate joint action addressing the climate emergency by sharing successful strategies and
identifying equitable opportunities to reduce greenhouse gas emissions, provide stewardship of the natural
world, and protect all county residents from climate impacts.
Gold Park Wetlands
Town of Hillsborough, North Carolina
➢ As a designated Tree City USA, the town's Public Space Division and Tree Board work to protect the town's
trees and educate citizens about the importance of urban forestry.
➢ Hillsborough is a Bee City USA. The town works to raise awareness of the role pollinators play in sustaining
more than 75 percent of the world's plant species and helps expand pollinator -friendly practices and
environments in town. The town's Public Space Division and Tree Board are working in partnership with
the Hillsborough Garden Club to develop the program and educational materials, including actions residents
can take.
➢ The Town has adopted a resolution supporting the goal of using 100 percent clean energy by 2050 and
fostering a resilient and sustainable community.
➢ The Town's Stormwater and Environmental Services Division was created to comply with many state and
federal mandates for environmental stewardship.
➢ The town has partnered with Orange County for curbside collections of recyclables throughout the town
and to provide collection bins for recyclables downtown and along the Riverwalk greenway. The town has
invested in a battery -powered cart for use by Public Works Department employees when collecting trash
and recyclables along Riverwalk. Additionally, the town collects appliances and scrap metal for recycling.
➢ The Water Distribution and Wastewater Collection Division works to prevent sanitary sewer overflows and
environmental damage they cause. The division's fats, oil, and grease program included educational
presentations at schools and public events about keeping these blockage -causing substances out of the
Town's sewer system.
➢ As part of its efforts to make Hillsborough
a more walkable community, the town has
improved sidewalks and pedestrian
crossings in the downtown area. It also has
created new sidewalks and connections to
the Riverwalk greenway in West
Hillsborough.
➢ The town has contributed to Eno River
water quality by building a wetland area in
Gold Park and a BioDock in Kings Highway
Park.
➢ Cates Creek Park is now home to a
pollinator rain garden, and other pollinator
gardens have been built in Gold Park and at
the West King Street parking lot.
➢ The Town's ground maintenance
contract includes environmentally friendly
requirements for pruning and mulching and
for the limited use of chemicals.
Local Economy
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, education, healthcare, 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.
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 2020 was 5.9% for Orange
County, while the state and national rates were 7.6% and 11.1%, respectively. The Town's economy is uncertain
due to COVID-19, but the issuance of building permits for residential and commercial developments continues to
be exceptionally strong, even during the pandemic through June 2020.
Government, Education, and Healthcare
Orange County government is a major employer in Hillsborough. Many of the county's administrative buildings are
located within town limits. One of those buildings is the Old Orange County Courthouse (c. 1844) is a Greek -revival
Town of Hillsborough, North Carolina
building designed and built by local builder John Berry. The courthouse is still in use for county judicial business
and is open to the public for free visits. The courthouse lawn is home to many outdoor musical performances and
festivals and acts as a "town square" in many respects.
The Orange County Board of Education is in Hillsborough and serves thirteen schools throughout the county. Three
of the thirteen schools are within the town limits and seven more are served by Hillsborough's water and sewer
system.
Durham Tech has a 20 -acre campus in Hillsborough. The college occupies a 40,000 square -foot brick structure
that holds 22 instructional spaces, including classrooms, computer and science labs, a library, flexible use space,
instructional and student support services areas, and faculty and student lounges. The facility has many "green"
buildings features that contribute to energy efficiency and cost savings.
University of North Carolina (UNC) Medical Center operates a UNC Health Care Hillsborough Campus, which is a
68 -bed community hospital. The facility includes a Medical Office Building, Emergency Department, Outpatient
Surgery, and Inpatient Services. The hospital is the first in North Carolina to receive the Geriatric Emergency
Department Accreditation (GEDA) from the American College of Emergency Physicians (ACEP). This certifies that
staff has been specially trained to assess older patients more comprehensively. UNC is one of about 20 hospitals
accredited nationwide. Even though the hospital recently opened in 2015, expansion plans have been submitted
and going through the development review process. The expansion will add an estimated 100 jobs, 30 rehabilitation
beds, 50 acute care beds, and a dialysis unit.
Recreational, Visitor, and Cultural Events
The Town's three percent hotel/motel and one percent prepared food and beverage taxes have provided a
dedicated resource for promoting Hillsborough as a destination for arts and culture, unique cuisine, outdoor
recreation, and historical landmarks. Most events scheduled after March 2020 were canceled due to COVID-19.
The Tourism Development Authority (TDA), a component unit of the town, promotes travel, tourism, and
conventions; sponsors tourism -related events, and finances tourism -related capital projects. The Tourism Board
drives economic development by promoting travel, tourism, and visitor services. It sponsors programs and activities
designed to improve Hillsborough's attractiveness to visitors. The Tourism Board has contracted with the Alliance
for Historic Hillsborough to operate the Hillsborough Visitors Center. The center offers a gift shop, tours, exhibits,
and gardens.
Hillsborough has many festivals and events throughout the year, such as:
➢ Art in the Heart of Hillsborough
➢ Last Fridays Concert Series
➢ Hillsborough Garden Tour
➢ Last Fridays Artwalk
➢ Carolina Tarwheels Bikefest
➢ Farm Fare Tasting Event
➢ Hillsborough Hog Day BBQ Festival
➢ Moorefields Bluegrass Festival
➢ River Park Concert
➢ Historic Hillsborough Half Marathon & 5K
➢ Handmade Parade
➢ Hillsborough Halloween Spirits Tours
➢ Solstice Celebration Lantern Walk
➢ Hillsborough Holiday Parade and Tree
Lighting
➢ Candlelight Holiday Home Tour
Ayr Mount is a Federal -era plantation house built in 1815 in Hillsborough by
William Kirkland.
Gold Park
Town of Hillsborough, North Carolina
Hillsborough is rich with museums and historical sites.
➢ Alexander Dickson House (late 18thcentury)
➢ Ayr Mount (1800's Federal -era plantation
house)
➢ Burwell School Historic Site (1800's)
➢ Dickerson's Chapel AME Church (1790)
➢ First Baptist Church (c.1860/1868)
➢ Hillsborough United Methodist Church
(c.1860)
➢ Hillsborough Presbyterian Church (c.1816)
Recreation, sports, and leisure opportunities abound in
Hillsborough.
➢ Cates Creek Park
➢ Mayo Park
➢ Murray Street Park
➢ Gold Park
➢ Hillsborough Heights Park
➢ Kings Highway Park
➢ Turnip Patch Park
➢ Exchange Park
➢ Fairview Park
➢ Hillsborough Youth Athletic Association baseball
fields
➢ River Park
➢ Cates Creek Greenway
➢ Margaret Lane Cemetery (c.1885)
➢ Moorefields (c.1785)
➢ Occaneechi Village Replica Site
➢ Old Orange County Courthouse (c.1844)
➢ Old Town Cemetery (c.1757)
➢ Orange County Historical Museum
➢ Ruffin-Roulhac House (c.1821)
➢ St. Matthew's Episcopal Church (c.
1825/1826)
Riverwalk Picnic Table
➢ Calvin Street Greenway
➢ Riverwalk
➢ Historic Occoneechee Speedway Trail
➢ Occoneechee Mountain State Natural Area
➢ Kings Highway Park
➢ Duke Forest
➢ Ayr Mount
➢ Occoneechee Golf Club
➢ Central Recreation Center
➢ Triangle Area Polo Club & Arena
➢ Orange County Sporstplex
Residential Growth
Hillsborough's population will increase significantly over the next few years. The Town continues to receive
commercial inquires and experience expansion of existing businesses. The following neighborhoods are under
development or will be in the near future.
Town of Hillsborough, North Carolina
➢ 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. Construction is nearly
complete in the residential sections of Waterstone. The development will add 750 residential units and
more than 1,500 residents to Hillsborough.
➢ Forest Ridge is a 233 single-family unit project on U.S. 70 A. About 25 permits remain to be issued for
this neighborhood.
➢ The Fiori Hill project plan proposes 46 single-family dwellings on 17.6 acres adjacent to Forest Ridge.
About twelve permits remain to be issued for this neighborhood.
➢ The Collins Ridge master plan includes 950 dwellings (houses, townhouses, and apartments) and 88
affordable rental units. Construction is scheduled to start by the end of the calendar year 2020.
Long -Term Financial Planning
For quite a few years the town's approach to building its budget and a multi -year financial plan has been: 1) take
care of what we've got, 2) invest for the future, and 3) minimize rate impacts on the community. COVID-19 is a
health and economic crisis that needs no further explanation as everyone is acutely aware of its impacts. It's
further complicated due to the difficulty in forecasting the length and severity of the financial impacts on global,
national, and local economies, especially if there is a second or third wave of infections.
Revenue assumptions are critical as they are the primary factor in determining expenditure limits for the budget.
Assumptions from local governments across North Carolina varied wildly as budgets were being developed for
the fiscal year 2021, with far greater ranges than anyone on the budget team has ever seen. There were no
common baselines when it came to projecting key revenue sources, such as property tax collection rates, sales
taxes, Powell Bill (state gas tax), food and beverage, accommodations tax, water and sewer revenues, and many
others.
The fiscal year 2021 budget was the first budget presented to Hillsborough's town board in the last 23 years that
was not in a multi -year format. Hillsborough is one of the only local governments in the state that uses a multi-
year format. During budget development while in the early stages of COVID-19, it was difficult to accurately
project for three months, much less three years. To minimize wasted time and help everyone focus attention on
the most pressing issues, the document was prepared in a traditional one-year format. Hopefully, the situation will
stabilize going into the fiscal year 2022 and staff can resume with the multi -year format that's been so successful.
Due to the uncertainty, the following approaches were used in developing the FY21 budget: 1) simplify and
prioritize, 2) increase options and 3) prepare for more tight budgets ahead.
1. Simplify and prioritize by focusing on the basics: core service delivery, asset maintenance, and retaining
employees since skill, experience, and know-how are a service organization's most important resource. Most
everything else will need to wait until the situation stabilizes, then financial condition and priorities can be
reassessed.
2. Increase options to have the financial flexibility to deal with the unexpected issues that will arise, especially if it
gets worse in FY21 and continues into FY22 or beyond. Increasing options are being done through conservative
projections on the revenue side and trimming expenses to protect the town's financial reserves. Many requests,
even those that have been planned for some time have been cut, delayed, or reduced. Most vacant positions are
being frozen. Making tough decisions today gives us more options to weather unexpected challenges, especially
if it's a prolonged event. Now is the easiest time to do this. Underestimating potential financial impacts creates
significant risks for the organization and its ability to serve our community. Being overly optimistic with revenue
estimates means potentially having to make significant mid -year cuts- this narrows options and unnecessarily
makes the situation more complicated. If things turn out to be better than projected, then it's a relatively easy
adjustment to add unfunded items back into the budget.
3. Prepare for more tight budgets ahead. While everyone hopes the recovery will be quick and robust it's
important to remember that during recessions governments are often the last to feel the impact, compared to
businesses, but also last to recover. After emerging from the recession there is usually a backlog of deferred
Town of Hillsborough, North Carolina
vehicle and equipment replacements, and other maintenance projects to address before high priority projects can
be funded, thus further extending the length of the recovery.
Major Initiatives
The Town's future capital plans are established in a seven-year Capital Improvement Plan which is revised during
the yearly budget preparation. During the year, the Town funded and managed many significant projects including
the following:
General Government
➢ Street Repaving - This initiative is being funded without debt and uses the Town's Powell Bill (gas tax
allocation- $165,000) and General Fund revenues ($185,000) 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.
➢ Valley Forge Stormwater Project — The purpose of this $600,000 project is to replace three 90" pipes
crossing under Valley Forge Road. The pipes have deteriorated due to age, current flow, and damage from
debris. This project was monitored throughout FY2020 and will be completed in FY2021.
Water and Sewer Fund
➢ Reservoir Phase II -To address long-term water supply needs and accommodate the type of growth that
matches the Town's vision, Phase 2 expansion of the West Fork Eno River Reservoir began construction
in April 2018. Revenue bonds were sold on May 9, 2018, providing over $11.1 million in funding for the
project. The remaining funds were raised through a bank placement in February 2020 to pay for the
remaining road project required to finish the project. Debt payments for the project are $840,550 for FY21,
$839,828 in FY22 and $840,374 in FY23. Phase 2 will yield an additional 1.2 million gallons per day of
water capacity.
Debt Administration
Hillsborough's current debt burden is above the North Carolina state average and below the national average for
municipalities, with net overall debt at $4,212 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 22 fiscal years, and no debt
service expenditures on general obligation bonded debt have been incurred in the General Fund during the last 22
fiscal years. The Town has avoided a heavy debt load, which has plagued many municipalities, in its General Fund.
Debt service costs make up 9.57% of General Fund expenditures. This includes short-term debt for equipment
needs like garbage trucks, leaf collection equipment, police vehicles, as well as long-term debt for building
renovations and park construction. Revenue bonds were issued for the first time to fund the expansion of the West
Fork Eno Reservoir for $11.1 million in FY18. A second revenue bond issue for $3.7 million was issued in FY20.
Debt payments account for 23.11% of Water and Sewer Fund expenditures, which was an increase 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 to avoid incurring unreasonable risks inherent in over -investing
in specific instruments, or maturities. Without exception, no more than 50% of the Town's total investment portfolio
will be invested in a single security type.
Town of Hillsborough, North Carolina
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, 2019. The Certificate of Achievement is a prestigious
national award recognizing conformance with the highest standards for the 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. 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 25 consecutive years (fiscal years ended 1994 through 2019). 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 the independent certified public accountants, Cherry Bekaert, LP, 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
responsibly and progressively.
Respectfully submitted,
Eric J. Peterson
Dap.hAL Sciuilat
Daphna Schwartz, CPA
Town Manager Finance Director
G�9
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Town of Hillsborough
North Carolina
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019
Executive Director/CEO
Financial Section
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Cherry Bekaert"P
CPAs & Advisors
Report of Independent Auditor
To the Honorable Mayor and Town Council
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 (the "Town"), as of and for the year ended June 30, 2020, and the
related notes to the financial statements, which collectively comprise the Town's basic financial statements as
listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement. The financial statements
of the Hillsborough Tourism Board and Hillsborough Tourism and Development Authority 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 auditor's judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the Town's preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Town's internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of the Town as of June 30,
2020, and the respective changes in financial position, and, where applicable, cash flows thereof and the
respective budgetary comparison for the General fund for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and the required supplementary financial data as listed in the table of contents be
presented to supplement the basic financial statements. Such information, although not a required part of the
basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial statements, and
other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Supplementary and Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the Town's basic financial statements of the Town. The introductory section, combining and individual
fund statements and schedules, other schedules, and statistical section, are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The combining and individual fund statements and schedules and other schedules are the responsibility of
management and were derived from and relate directly to the underlying accounting and other records used to
prepare the basic financial statements. Such information has been subjected to the auditing procedures applied
in the audit of the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our opinion, based
on our audit, the information is fairly stated, in all material respects, in relation to the basic financial statements
as a whole.
The introductory 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 assurance on
them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 18, 2020
on our consideration of the Town's internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts, grants agreements, and other matters. The purpose of the
report is to describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the Town's internal control over financial reporting and compliance.
Raleigh, North Carolina
November 18, 2020
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Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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, 2020.
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 $81,371,842.
• The Town's total net position increased by $3,131,557 due to general fund and water and sewer
fund revenues coming in over budget, expenditures and expenses were also less than budgeted
due to projects, maintenance and repairs and other operating costs that were delayed due to the
COVID-19 pandemic.
• As of the close of the current fiscal year, the Town's governmental funds reported ending fund
balances of $9,042,047, a net increase of $1,576,629 from the prior year. This is the result of an
increase in net position for the general fund and a positive increase in the capital project activity.
Approximately 20.47% of this total amount or $1,851,081 is nonspendable, or restricted.
• At the end of the current fiscal year, unassigned fund balance for the General Fund was $6,438,825,
or 59.96% of total General Fund expenditures, including other financing uses, for the fiscal year.
• The Town's total debt increased by $1,185,485 during the current fiscal year due to new bonds
issued in the amount of $3,271,000 offset by the retirement of existing debt during the year in the
amount of $2,085,515.
• The Town obtained an AA bond rating from S&P (Standard & Poors) on May 2, 2018.
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.
5
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
Required Components of Annual Financial Report
Figure 1
Management's
Discussion and
Analysis
Basic
Financial
Statements
Government -Wide
Financial
Statements
Fund
Financial
Statements
Notes to the
Financial
Statements
Summary ► Detail
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.
6
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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.
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 65 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, as well as information related to the total OPEB liability and related ratios.
Required supplementary information can be found beginning on page 67 of this report.
7
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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
2020 2019 2020 2019 2020 2019
Current assets $ 9,707,979 $ 9,071,171 $ 24,187,465 $ 20,377,576 $ 33,895,444 $ 29,448,747
Other assets - - - -
Capital assets, net 23,573,145 23,997,360 62,459,019 61,735,518 86,032,164 85,732,878
Total assets 33,281,124 33,068,531 86,646,484 82,113,094 119,927,608 115,181,625
Deferred outflows of
resources 1,182,611 1,336,851 489,909 562,168 1,672,520 1,899,019
Long-term liabilities
outstanding 7,303,538 8,228,935 30,574,754 28,647,755 37,878,292 36,876,690
Other liabilities 537,216 484,748 1,232,365 1,325,865 1,769,581 1,810,613
Total liabilities 7,840,754 8,713,683 31,807,119 29,973,620 39,647,873 38,687,303
Deferred inflows of
resources 402,835 109,915 177,578 42,588 580,413 152,503
Net position:
Net investment in
capital assets 19,779,745 20,511,801 38,149,486 38,536,890 57,929,231 59,048,691
Restricted 1,851,081 3,757,005 - 2,677,877 1,851,081 6,434,882
Unrestricted 4,589,320 1,312,978 17,002,210 11,444,287 21,591,530 12,757,265
Total net position, ending $ 26,220,146 $ 25,581.784 $ 55,151,696 $ 52,659,054 $ 81,371,842 $ 78.240.838
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 $81,371,842 as of June 30, 2020. The Town's net position increased by $3,131,557
for the fiscal year ended June 30, 2020. However, the largest portion (71.19%) 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, $1,851,081 (2.28%) represents resources
that are subject to external restrictions on how they may be used. The remaining balance of $21,591,530 (26.53%)
is unrestricted and may be used to meet the Town's ongoing obligation to citizens and creditors.
8
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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 99%.
• 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
2020 2019 2020 2019 2020 2019
Revenues:
Program revenues:
Charges for services $ 316,812 $ 210,734 $ 10,936,743 $ 12,549,822 $ 11,253,555 $ 12,760,556
Operating grants
and contributions 267,790 221,637 32,361 267,790 253,998
Capital grants and
contributions 236,211 3,379,916 996,128 - 1,232,339 3,379,916
General revenues:
Property taxes 7,389,956 6,510,109 7,389,956 6,510,109
Local option sales
taxes 1,719,865 1,708,025 - - 1,719,865 1,708,025
Gross receipts on
short-term rental
property 11,517 13,593 - - 11,517 13,593
Other Miscellaneous
Taxes 30,986 6,347 - 30,986 6,347
Unrestricted inter-
governmental
revenues 1,055,076 1,135,259 - 1,055,076 1,135,259
Other 501,366 (1,825,646) (105,484) 2,365,272 395,882 539,626
Total revenues 11,529,579 11,359,974 11,827,387 14,947,455 23,356,966 26,307,429
9
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
The Town of Hillsborough's Changes in Net Position
Figure 3 (Continued)
Expenses:
General government
Public safety
Transportation
Environmental
protection
Economic and
physical development
Community activities
and projects
Parks and recreation
Interest on long-term
debt
Stormwater
Water and sewer
Total expenses
Increase in net position
Net position, beginning
Net position, ending
Governmental Activities
2020 2019
$ 2,391,829
5,559,342
1,024,817
558,337
557,378
166,373
511,512
121,076
$ 1,865,007
4,705,989
718,593
468,057
488,592
34,311
493,868
140,004
Business -Type Activities
2020 2019
$ $
527,372
8,807,373
566,231
9,355,337
10,890,664 8,914,421 9,334,745 9,921,568 20,225,409 18,835,989
638,915 2,445,553 2,492,642 5,025,887 3,131,557 7,471,440
25,581,231 23,136,231 52,659,054 47,633,167 78,240,285 70,769,398
$ 26,220,146 $ 25,581,784 $ 55,151,696 $ 52,659,054 $ 81,371,842 $ 78,240.838
Total
2020 2019
$ 2,391,829
5,559,342
1,024,817
558,337
557,378
121,076
527,372
8,807,373
$ 1,865,007
4,705,989
718,593
468,057
488,592
166,373 34,311
511,512 493,868
140,004
566,231
9,355,337
Governmental activities. Governmental activities increased the Town's net position by $638,915, thereby
accounting for 20.40% of the total growth in the net position of the Town of Hillsborough. Key elements of this
increase are as follows:
• Property taxes revenue increased over $879,000. The FY19 property taxes included a tax
abatement that lowered the revenue by $446,940. This abatement was attributable to several years
of payments, however it was absorbed in FY19. .After taking the abatement into consideration, the
increase is almost $433,000. This increase can be attributed to the Town's 7% growth rate. There
were 203 new residential properties added to the tax base for FY20 collections.
Business -type activities. Business -type activities increased the Town's net position by $2,492,642, accounting
for 79.60% of the total growth in the government's net position. Key elements of this increase are as follows:
• The Water and Sewer Fund experienced a decrease in charges for services due to COVID-19. The
Town also delayed many expenses due to the outbreak that were still not fully expended as of the
end of the year.
• The Water and Sewer fund received capital contributions for dedications and Water and Sewer
development in the amount of $996,128.
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.
10
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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 $7,188,375, while total fund balance reached
$8,471,021. 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 66.94% of general fund expenditures, while total fund balance represents 78.89% of
the same amount.
At June 30, 2020, the governmental funds of the Town reported a combined fund balance of $9,042,047, with a net
increase in fund balance of $1,576,629. This increase is primarily related to capital project revenues.
General fund budgetary highlights. During the fiscal year, the Town revised the budget at least once a month.
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 $722,722. Expenditures
were $1,435,913 less than budgeted, primarily due to the impacts of COVID-19, 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 $10,385,294, a 4.29% or $464,411 decrease from the previous year. Restricted net position
increased $3,179,489 due to developer donations collected in the current and prior fiscal years, which primarily
consist of system development fees accounted for in capital reserve funds. Charges for services were down over
1.6 million due to a drop in the collection of system development fees. System development fees are a charge
assessed on new development to fund capital improvements necessitated by and attributable to that new
development or to recoup the costs of existing facilities that serve the new development. The total growth in net
position was $2,492,642.
Unrestricted net position of the Stormwater Fund at the end of the fiscal year amounted to $759,550, a 27.75% or
$164,968 increase from the previous year. The increase is largely attributed to expenditures being less than
expected.
Other factors concerning the fund's finances have been addressed in the discussion of the Town's business -type
activities.
Capital asset and debt administration
Capital assets. The Town's investment in capital assets for its governmental and business -type activities as of
June 30, 2020 totals $86,032,164 (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:
• Vehicles ($141,950)
• Street resurfacing ($210,150)
Major developer -dedicated capital asset transactions during the year include the following:
• Forest Ridge Booster Pump Station ($539,500)
11
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
The Town of Hillsborough's Capital Assets
(Net of Accumulated Depreciation)
Figure 4
Land
Construction in progress
Buildings and
improvements
Plant and distribution
systems
Infrastructure
Equipment
Vehicles
Intangibles
Governmental
Activities
Business -Type
Activities
Total
2020 2019 2020 2019 2020 2019
$ 4,657,781 $ 4,634,594
145,692 49,297
$ 6,133,088
11,067,121
6,200,607 6,286,045 16,922,750
11,653,414
325,571
590,080
11,759,238
389,865
878,321
25,299,114
2,395,631
407,414
233,901
$ 6,132,444 $ 10,790,869 $ 10,767,038
9,205,410 11,212,813 9,254,707
17,915,526 23,123,357 24,201,571
25,417,324
2,466,199
279,668
318,947
25,299,114 25,417,324
14, 049, 045 14, 225, 437
732,985 669,533
823,981 1,197,268
Total $ 23,573,145 $ 23,997,360 $ 62,459,019 $ 61.735,518 $ 86,032,164 $ 85,732,878
Additional information on the Town's capital assets can be found in Note 3.A.5. of the basic financial statements.
Long-term debt. As of June 30, 2020, the Town of Hillsborough had outstanding bonded debt of $13,426,000
which represents bonds secured solely by specified revenue sources (revenue bonds). The remainder of the Town's
debt represents revolving loans payable and installment purchases secured solely by revenues of the project or
specified purchases.
Revolving loan payable
Special revenue bonds
Premium on bonds
Installment purchases
The Town of Hillsborough's Outstanding Debt
Revolving Loans Payable and Installment Purchases
Figure 5
Governmental
Activities
2020 2019
Business -Type
Activities Total
2020 2019
2020 2019
$ $ $ 14,336,167 $ 15,397,010 $ 14,336,167 $ 15,397,010
13,426,000 10,155,000 13,426,000 10,155,000
- - 913,641 970,330 913,641 970,330
3,793,400 4,632,280 423,833 552 936 4,217,233 5,185,216
Total $ 3,793,400 $ 4,632,280 $ 29,099,641 $ 27,075.276 $ 32,893,041 $ 31,707.556
The Town's total debt increased by $1,185,485 during the current fiscal year due to repayments of $2,085,515
offset by newly issued special revenue bonds of $3,271,000.
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 $89,551,324. The Town does not have any bonds authorized but unissued
at June 30, 2020.
Additional information regarding the Town's long-term debt can be found in Note 3.B.8 of the basic financial
statements.
12
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
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 5.9% as of June 30, 2020 is below
the state average of 7.5%.
• No increase in property tax rate.
• No general obligation debt in the General Fund.
Budget highlights for the fiscal year ending June 30, 2021
Governmental activities: The property tax rate remains at 62 cents for FY21. This will be the eighth consecutive
year without a property tax rate increase. Expenses increase by 3.4% in FY21.To address the novel coronavirus
financial implications, no merit adjustments were given, and capital projects, as well as non -mission critical
expenditures were delayed if possible.
Other budget highlights in brief:
• Connection Feasibility Study ($45,000)
• Fire Chief ($35,000)
• Valley Forge Road Project ($475,000)
• Garbage Truck ($310,000)
• Comprehensive Plan ($75,000)
• Rail Station ($34,000)
Business -type activities:
Water and Sewer Fund
In order to provide financial relief to customers during the novel coronavirus, the projected 5% rate increases to
both water and sewer rates for FY21 were delayed.
Operational expenditures in the Water/Sewer Fund are expected to increase by 10.4% in FY21. It is important to
note that this total reflects cuts and deferments made to FY20 year-end expenditures and that FY21 includes
projects that are funded with one-time revenue sources of water and sewer system development fees.
Other budget highlights in brief
• 16 -inch Water Main Interconnects ($465,000)
• Economic Development District Water Line Extension ($259,404)
• River Pump Station Design ($200,000)
• Infrastructure Rehabilitation ($150,000)
13
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
Stormwater Fund
Stormwater rates will not increase, and expenses will increase by 11%% in FY21.
Other budget highlight in brief:
• Valley Forge Road Project ($100,000)
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 Finance Director, Town of
Hillsborough,105 East Corbin Street, Post Office Box 429, Hillsborough, North Carolina 27278 or
Finance(a hillsboroughnc.gov.
14
Basic Financial Statements
15
Town of Hillsborough, North Carolina
Statement of Net Position
June 30, 2020
Exhibit 1
(2 pages)
Primary Government Component Units
Governmental Business -Type
Activities Activities
Total
Hillsborough
Tourism Hillsborough
Development Tourism
Authority Board
ASSETS
Current assets:
Cash and investments $ 7,977,124 $ 12,173,396 $ 20,150,520 $ 258,470 $ 359,586
Receivables:
Taxes receivable, net 153,685 - 153,685
Accrued interest receivable,
property taxes 25,257 25,257 -
Accounts receivable, net 60,953 1,681,287 1,742,240 87 16
Due from other governments 988,641 - 988,641 -
Due from primary government - - - 8,248 53,748
Prepaid expenses 215 215 - 689
Restricted assets:
Cash and investments 502,319 10,332,567 10,834,886
Total current assets 9,707,979
24,187,465 33,895,444
Noncurrent assets:
Capital assets:
Land and construction -in -
progress 4,803,473 17,200,209 22,003,682
Other capital assets, net of
depreciation 18,769,672 45,258,810 64,028,482
266,805 414,039
Total capital assets 23,573,145 62,459,019 86,032,164
Total noncurrent assets 23,573,145 62,459,019 86,032,164
Total assets 33,281,124 86,646,484 119,927,608 266,805 414,039
DEFERRED OUTFLOWS OF
RESOURCES
Pension deferrals
OPEB deferrals
1,127,025
55,586
1,182,611
462,797 1,589,822
27,112 82,698
489,909 1,672,520
The notes to the financial statements are an integral part of this statement. 16
Exhibit 1
(2 pages)
Primary Government Component Units
Governmental Business -Type
Activities Activities
Total
Hillsborough
Tourism Hillsborough
Development Tourism
Authority Board
LIABILITIES
Current liabilities:
Accounts payable and accrued
liabilities $ 375,525 $ 458,628 $ 834,153 $ 230 $ 10,230
Payable from restricted assets -
customer deposits - 583,611 583,611 -
Accrued interest payable 50,226 190,126 240,352 -
Unearned revenue 49,469 - 49,469 -
Due to component units 61,996 61,996 - -
Current portion of long-term
liabilities 944,693 1,586,982 2,531,675 - -
Total current liabilities 1,481,909 2,819,347 4,301,256 230 10,230
Long-term liabilities:
Net pension liability 1,690,884 781,966 2,472,850
Total pension liability 783,583 783,583
Total OPEB liability 713,727 461,563 1,175,290
Due in more than one year 3,170,651 27,744,243 30,914,894
Total noncurrent liabilities 6,358,845 28,987,772 35,346,617
Total liabilities
DEFERRED INFLOWS OF
RESOURCES
Pension deferrals
OPEB deferrals
Total deferred inflows
7,840,754 31,807,119
71,080 10,418
331,755 167,160
402,835 177,578
39,647,873
81,498
498,915
580,413
NET POSITION
Net investment in capital assets 19,779,745 38,149,486 57,929,231
Restricted for:
Stabilization by state statute 1,473,671 - 1,473,671
Streets 200,490 200,490
Water and sewer projects - 5,857,366 5,857,366
Capital projects 176,920 176,920
Unrestricted 4,589,320 11,144,844 15,734,164
230 10,230
8,335
258,240
53,764
350,045
Total net position $ 26,220,146 $ 55,151,696 $ 81,371,842 $ 266,575 $ 403,809
The notes to the financial statements are an integral part of this statement. 17
Town of Hillsborough, North Carolina
Statement of Activities
Year Ended June 30, 2020
Exhibit 2
(4 pages)
Program Revenues
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
Primary government
Governmental activities:
General government $ 2,391,829 296,255 $ 10,895
Public safety 5,559,342 17,667 20,500 -
Transportation 1,024,817 202,395
Environmental protection 558,337 -
Economic and physical
development 557,378 34,000
Community activities and
projects 166,373 - - -
Parks and recreation 511,512 2,890 236,211
Interest on long-term obligations 121,076 - -
Total governmental activities
10,890,664 316,812 267,790 236,211
Business -type activities:
Water and sewer 8,807,373 10,265,866
Stormwater 527,372 670,877
Total business -type
activities
996,128
9,334,745 10,936,743 - 996,128
Total primary government $ 20,225,409 $ 11,253,555 $ 267,790 $ 1,232,339
Component units
Hillsborough Tourism
Development Authority $ 55,854 $
Hillsborough Tourism Board 361,935
Total component units $ 417,789 $ $ - $
The notes to the financial statements are an integral part of this statement. 18
Exhibit 2
(4 pages)
Net Revenue (Expense) and Changes in Net Position
Primary Government Component Units
Governmental Business -Type
Activities Activities
Tourism
Development Tourism
Total Authority Board
$ (2,084,679) - $ (2,084,679)
(5,521,175) - (5,521,175)
(822,422) (822,422)
(558,337) (558,337)
(523,378) (523,378)
(166,373) (166,373)
(272,411) (272,411)
(121,076) (121,076)
(10,069,851) - (10,069,851)
(10, 069, 851)
2,454,621 2,454,621
143,505 143,505
2,598,126 2,598,126
2,598,126 (7,471,725)
(55,854)
(361, 935)
(55,854) (361,935)
The notes to the financial statements are an integral part of this statement. 19
Town of Hillsborough, North Carolina
Statement of Activities
Year Ended June 30, 2020
Exhibit 2
(4 pages)
Program Revenues
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
General revenues:
Taxes:
Property taxes, levied for general purposes
Local option sales taxes
Gross receipts on short-term rental property
Other Miscellaneous taxes
Unrestricted intergovernmental revenues
Investment earnings, unrestricted
Payment from Town of Hillsborough
Gain (loss) on disposal of capital assets
Miscellaneous
Transfers
Total general revenues and transfers
Change in net position
Net position, beginning
Net position, ending
The notes to the financial statements are an integral part of this statement. 20
Exhibit 2
(4 pages)
Net Revenue (Expense) and Changes in Net Position
Primary Government Component Units
Governmental Business -Type
Activities Activities
Total
Tourism
Development Tourism
Authority Board
7,389,956 $ - $ 7,389,956 $ $
1,719,865 1,719,865 - -
11,517 11,517
30,986 30,986 - -
1,055,076 - 1,055,076 -
171,563 119,062 290,625 - -
- - - 60,347 371,326
- (83,384) (83,384) - -
131,951 56,690 188,641 -
197,852 (197,852) - -
10,708,766
(105,484) 10,603,282 60,347 371,326
638,915 2,492,642 3,131,557 4,493 9,391
25,581,231 52,659,054 78,240,285 262,082 394,418
$ 26,220,146 $ 55,151,696 $ 81,371,842 $ 266,575 $ 403,809
The notes to the financial statements are an integral part of this statement. 21
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 3o, 2020
Exhibit 3
(2 pages)
Major Fund
Total Total
General Nonmajor Governmental
Fund Funds Funds
ASSETS
Cash and investments $ 7,698,625 $ 278,499 $ 7,977,124
Taxes receivable 153,685 153,685
Accounts receivable, net 60,953 - 60,953
Due from other governments 823,200 165,441 988,641
Due from other funds 160,038 - 160,038
Restricted assets
Cash and investments 200,490 301,829 502,319
Total assets $ 9,096,991 $ 745,769 $ 9,842,760
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued
liabilities $ 360,820 $ 14,705 $ 375,525
Due to other funds - 160,038 160,038
Unearned revenue 49,469 - 49,469
Due to component units 61,996 61,996
Total liabilities 472,285 174,743 647,028
DEFERRED INFLOWS OF RESOURCES
153,685 - 153,685
FUND BALANCES
Restricted for:
Stabilization by state statute 1,082,156 391,515 1,473,671
Streets 200,490 200,490
Capital projects - 176,920 176,920
Committed for:
Capital projects - 189,441 189,441
Assigned for:
Subsequent year's expenditures 749,550 749,550
Unassigned 6,438,825 (186,850) 6,251,975
Total fund balances 8,471,021
Total liabilities, deferred
inflows of resources and
fund balances
571,026 9,042,047
$ 9,096,991 $ 745,769 $ 9,842,760
The notes to the financial statements are an integral part of this statement. 22
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 3o, 2020
Exhibit 3
(2 pages)
Amounts reported for governmental activities in the statement of net
position are different because:
Total fund balances, governmental funds $ 9,042,047
Capital assets used in governmental activities are not financial resources
and therefore not reported in the funds. 23,573,145
Deferred outflows of resources related to pensions and OPEB are not reported in the
funds 1,182,611
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 25,257
Liabilities for earned revenues considered deferred inflows of resources in
the fund statements 153,685
Deferred inflows of resources related to pensions and OPEB are not reported in the
funds (402,835)
Some liabilities, including accrued interest, are not due and payable in the
current period, and therefore are not reported in the funds. (4,165,570)
Total pension liability (783,583)
Net pension liability (1,690,884)
Total OPEB liability (713,727)
Net position of governmental activities $ 26,220,146
The notes to the financial statements are an integral part of this statement. 23
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in Fund Balance
Governmental Funds
Year Ended June 30, 2020
Revenues
General revenues:
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental revenues
Restricted intergovernmental revenues
Investment earnings
Contribution from property owners
Other general revenues
Total general revenues
Functionally related revenues:
Use and rental fees
Total revenues
Expenditures
General government
Public safety
Transportation
Environmental protection
Economic and physical development
Community activities and projects
Parks and recreation
Debt service:
Principal retirement
Interest and fiscal charges
Total expenditures
Revenues over (under) expenditures
Other financing sources (uses)
Transfer to Public Safety Facility Capital
Project Fund
Transfer to Riverwalk CMAQ Capital
Projects Fund
Transfer to General Capital Projects Fund
Transfer from Town Barn Improvements
Capital Projects Fund
Transfer from Downtown Improvements
Capital Projects Fund
Transfer to Water and Sewer Fund
Transfer from General Fund
Total other financing sources (uses)
Net change in fund balances
Fund balances, beginning
Fund balances, ending
Major Fund
General
Fund
Exhibit 4
(2 pages)
Total
Nonmajor
Funds
Total
Governmental
Funds
$ 7,422,863 $ $ 7,422,863
1,738,597 1,738,597
1,081,038 1,081,038
317,212 1,022,499 1,339,711
170,325 1,238 171,563
11,147 11,147
87,365 - 87,365
10,817,400
344,892
11,162,292
1,939,539
5,006,500
684,311
462,129
473,494
250,962
511,512
846,287
121,076
10,295,810
866,482
(312,000)
(50,343)
(80,000)
55,368
36,487
(350,488)
515,994
7,955,027
1,034,884
11,852,284
344,892
1,034,884 12,197,176
290,142 2,229,681
5,006,500
684,311
462,129
16,395 489,889
250,962
7,378 518,890
846,287
121,076
313,915 10,609,725
720,969 1,587,451
(10,822)
350,488
339,666
1,060,635
(489,609)
(312,000)
(50,343)
(80,000)
55,368
36,487
(10,822)
350,488
(10,822)
1,576,629
7,465,418
$ 8,471,021 $ 571,026 $ 9,042,047
The notes to the financial statements are an integral part of this statement. 24
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in Fund Balance
Governmental Funds
Year Ended June 30, 2020
Exhibit 4
(2 pages)
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 $ 1,576,629
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
depreciation ($1,079,609) exceeded capital outlays ($416,149) in the current
period. (663,459)
The effect of transfers related to Capital Assets and Debt 208,674
Contributions to the pension plan in the current fiscal year are not included in the
statement of activities 73,284
Benefit payments paid and adminstrative expense for the LEOSSA are not included
in the statement of activities 13,652
Benefit payments paid and adminstrative expense for the OPEB are not included
in the statement of activities 3,072
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 811
Change in deferred revenues related to grants receivable. (976,793)
The repayment of the principal of long-term debt ($846,287) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position.
846,287
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 7,408
Compensated absences 11,358
Pension expense (519,729)
OPEB expense 57,721
Changes in net position of governmental activities
$ 638,915
The notes to the financial statements are an integral part of this statement. 25
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2020
Exhibit 5
Revenues
General revenues
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental revenues
Restricted intergovernmental revenues
Investment earnings
Other general revenues
Total general revenues
Functionally related revenues
Use and rental fees
Total revenues
Expenditures
General government
Public safety
Transportation
Environmental protection
Economic and physical development
Community activities and projects
Parks and recreation
Contingency
Total expenditures
Revenues under expenditures
Other financing sources (uses)
Transfer from Downtown Improvements
Capital Project Fund
Transfer from Town Barn Improvements
Capital Project Fund
Transfer to Riverwalk - CMAQ Fund
Transfer to Public Safety Facility Capital
Project Fund
Transfer to General Capital Projects Fund
Total other financing sources (uses)
Appropriated fund balance
Net change in fund balance
Fund balance, beginning
Fund balance, ending
Original
Budget
$ 7,148,600
1,528,555
1,034,900
190,000
175,000
30,500
10,107, 555
145,200
10,252,755
2,168,493
4,934,416
963,093
561,861
490,396
464,655
766,574
250,000
10,599,488
(346,733)
346,733
Final
Budget
$ 7,146,469
1,493, 929
755,615
292,644
170,000
236,021
10,094,678
653,997
10,748,675
2,805,489
5,592,917
974,755
571,240
550,870
405,699
830,753
11,731,723
(983,048)
55,368
(50,343)
(312,000)
(80,000)
(386,975)
1,370,023
Actual
$ 7,422,863
1,738,597
1,081,038
317,212
170,325
87,365
10,817,400
344,892
11,162,292
2,222,021
5,234,108
725,329
538,452
473,494
349,753
752,653
10,295,810
866,482
36,487
55,368
(50,343)
(312,000)
(80,000)
(350,488)
Variance
Positive
(Negative)
$ 276,394
244,668
325,423
24,568
325
(148,656)
722,722
(309,105)
413,617
583,468
358,809
249,426
32,788
77,376
55,946
78,100
1,435,913
1,849,530
36,487
36,487
(1,370,023)
515,994 $ 515,994
7,955,027
$ 8,471,021
The notes to the financial statements are an integral part of this statement. 26
Town of Hillsborough, North Carolina
Statement of Net Position
Proprietary Funds
June 30, 2020
Exhibit 6
ASSETS
Current assets:
Cash and investments
Accounts receivable, net
Prepaid expenses
Restricted assets:
Cash and investments
Total current assets
Noncurrent assets:
Capital assets:
Land and construction -in -progress
Other capital assets, net of depreciation
Total capital assets
Total noncurrent assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Pension deferrals
OPEB deferrals
Total deferred outflows of resources
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
Payable from restricted assets - customer deposits
Accrued interest payable
Current portion of long-term liabilities
Total current liabilities
Long-term liabilities:
Net pension liability
Total OPEB liability
Due in more than one year
Total noncurrent liabilities
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Pension deferrals
OPEB deferrals
Total deferred inflows of resources
NET POSITION
Net investment in capital assets
Restricted for:
Water and sewer projects
Unrestricted
Total net position
Major
Water and
Sewer Fund
Nonmajor
Stormwater
Fund
Total
$ 11,369,532 $ 803,864 $ 12,173,396
1,649,368 31,919 1,681,287
215 215
10, 332, 567
23,351,682
17,166, 396
43,439,152
60,605,548
60,605,548
83,957,230
428,768
24,657
453,425
448,470
583,611
190,126
1,586,982
2,809,189
721,261
441,002
27,737,931
28,900,194
31, 709, 383
9,632
152,965
162,597
36,296,015
835,783
33,813
1,819,658
1,853,471
1,853,471
2,689,254
34,029
2,455
36,484
10,158
10,158
60,705
20,561
6,312
87,578
97,736
786
14,195
14,981
1,853,471
10,332,567
24,187,465
17,200,209
45,258,810
62,459,019
62,459,019
86,646,484
462,797
27,112
489,909
458,628
583,611
190,126
1,586,982
2,819,347
781,966
461,563
27,744,243
28,987,772
31, 807,119
10,418
167,160
177,578
38,149,486
5,857,366 5,857,366
10,385,294 759,550 11,144,844
$ 52,538,675 $ 2,613,021 $ 55,151,696
The notes to the financial statements are an integral part of this statement. 27
Town of Hillsborough, North Carolina
Statement of Revenues, Expenses and Changes in Net Position
Proprietary Funds
Year Ended June 3o, 2020
Exhibit 7
Major Nonmajor
Water and Stormwater
Sewer Fund Fund
Total
Operating revenues
Charges for services $ 9,954,986 $ 666,355 $ 10,621,341
System Development Fees 456,628 - 456,628
Other operating revenues 310,880 4,522 315,402
Total operating revenues 10,722,494
670,877 11,393,371
Operating expenses
Personnel services 2,914,587 278,959 3,193,546
Depreciation 1,695,988 56,645 1,752,633
Other current charges 3,372,024 191,768 3,563,792
Total operating expenses 7,982,599
Operating income 2,739,895
527,372 8,509,971
143,505 2,883,400
Nonoperating revenues (expenses)
Investment earnings 119,062 - 119,062
Amortization of premium on bonds payable 56,690 - 56,690
Gain (loss) on disposal of capital assets (83,384) (83,384)
Interest and fees (824,774) - (824,774)
Total nonoperating revenues (expenses)
(732,406) - (732,406)
Income before capital contributions and transfers 2,007,489
143,505 2,150,994
Capital contributions and transfers:
Transfer to General Fund (208,674) (208,674)
Transfer from Town Barn Capital Improvements 10,822 - 10,822
Capital contributions - dedications 539,500 - 539,500
Total capital contributions and transfers 341,648 - 341,648
Change in net position 2,349,137 143,505 2,492,642
Net position, beginning of year 50,189,538 2,469,516 52,659,054
Net position end of year $ 52,538,675 $ 2,613,021 $ 55,151,696
The notes to the financial statements are an integral part of this statement. 28
Town of Hillsborough, North Carolina
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2020
Exhibit 8
(2 pages)
Major Nonmajor
Water and Stormwater
Sewer Fund Fund
Total
Cash flows from operating activities
Cash received from customers $ 10,603,551 $ 674,102 $ 11,277,653
Cash paid for goods and services (3,272,139) (304,067) (3,576,206)
Cash paid to or on behalf of employees for
services (2,762,718) (176,437) (2,939,155)
Net cash provided by operating activities 4,568,694
Cash flows from capital and related financing
activities
Acquisition and construction of capital assets (2,434,452)
Proceeds from issuance of long-term debt 3,271,000
Principal paid on bonds, notes and installment
purchases (1,189,949)
Interest paid on bonds and installment purchases (809,460)
Other income 10,822
Net cash used by capital and related
financing activities (1,152,039)
Cash flows from investing activities
Interest on investments
Net cash provided by investing activities
193,598 4,762,292
(35,182)
(2,469,634)
3,271,000
(1,189,949)
(809,460)
10,822
(35,182) (1,187,221)
119,062 - 119,062
119,062 119,062
Net increase (decrease) in cash and cash
equivalents 3,535,717 158,416 3,694,133
Cash and cash equivalents, beginning 18,166,382 645,448 18,811,830
Cash and cash equivalents, ending $ 21,702,099 $ 803,864 $ 22,505,963
Cash and cash equivalents
Unrestricted $ 11,369,532 $ 803,864 $ 12,173,396
Restricted 10,332,567 - 10,332,567
Total cash and cash equivalents $ 21,702,099 $ 803,864 $ 22,505,963
The notes to the financial statements are an integral part of this statement. 29
Town of Hillsborough, North Carolina
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2020
Exhibit 8
(2 pages)
Major Nonmajor
Water and Stormwater
Sewer Fund Fund
Total
Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 2,739,895 $ 143,505 $ 2,883,400
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation 1,695,988 56,645 1,752,633
Provision for uncollectible accounts 24,174 - 24,174
Changes in assets and liabilities:
Accounts receivable (143,158) 3,225 (139,933)
Deferred outflows of resources for pensions 73,702 7,336 81,038
Deferred outflows of resources for OPEB (7,996) (788) (8,784)
Accounts payable and accrued liabilities 124,543 (24,176) 100,367
Deposits 31,765 - 31,765
Total OPEB liability (136,992) (13,634) (150,626)
Net pension liability 78,628 7,825 86,453
Deferred inflows of resources for pensions 4,538 451 4,989
Deferred inflows of resources for OPEB 118,234 11,767 130,001
Compensated absences payable (34,627) 1,442 (33,185)
Net cash provided by operating activities
Supplemental schedule of noncash investing and
financing activities
Capital asset additions included in accounts
payable and accrued liabilities
Capital contribution from developer
$ 4,568,694 $ 193,598 $ 4,762,292
$ 181,373 $ 181,373
$ 539,500 - $ 539,500
The notes to the financial statements are an integral part of this statement. 30
Town of Hillsborough, North Carolina
Notes to Financial Statements
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
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) 296-9451.
B. Basis of presentation
Government -wide statements: The statement of net position and the statement of activities display information
about the primary government and its component unit. These statements 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.
31
Town of Hillsborough, North Carolina
Notes to Financial Statements
Fund financial statements: The fund financial statements provide information about the Town's funds, including
the fiduciary fund. Separate statements for each fund category — governmental, proprietary, and fiduciary - 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 result from nonexchange transactions. Other
nonoperating revenues are ancillary activities such as investment earnings.
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.
The Town reports the following nonmajor governmental funds:
Consolidated 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.
Downtown Improvements Capital Project Fund. This fund is used to account for certain improvements to
the downtown area of the Town.
Riverwalk CMAQ Capital Project Fund. Three important sidewalk components are grouped for funding
purposes through the Congestion Mitigation and Air Quality program within the Department of
Transportation. Riverwalk provides a viable alternative to driving by allowing many residents of Hillsborough
to walk or bike into downtown, whether for work, shopping, or recreation. These sidewalk connections are
along Eno Mountain Road and provide access into the Occoneechee State natural area (connecting to
Gold Park); South Nash Street near the commercial area and the rail trestle, and Calvin Street, connecting
to Gold Park and Riverwalk.
Town Barn Improvements Capital Project Fund. The fund is used to account for various renovations and
upgrades to the Town Barn and North Campus, including certain data processing equipment. This project
was completed and closed during the current fiscal year.
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.
Public Safety Building Capital Project Fund. This fund will account for construction costs for the renovation
of the Public Safety Building.
32
Town of Hillsborough, North Carolina
Notes to Financial Statements
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
the Water and Sewer Capital Reserve Funds 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.
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, proprietary, and fiduciary fund financial statements. The government -wide, proprietary,
and fiduciary 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. Issuance 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 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.
33
Town of Hillsborough, North Carolina
Notes to Financial Statements
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. Most
intergovernmental revenues and sales and services are not susceptible to accrual, because generally they are not
measurable until received in cash. All taxes, including those dedicated for specific purposes are reported as general
revenues rather than program revenues. 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 General Capital Projects Fund,
the 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.
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. Non -participating interest
earning investment contracts are accounted for at cost. The NCCMT Government Portfolio, a SEC -registered (2a-
7) external investment pool, is measured at fair value. The NCCMT-Term Portfolio bond fund, has no rating and is
measured at fair value. As of June 30, 2020, the Term portfolio has a duration of .15 years. Because the NCCMT
Government and Term Portfolios have a weighted average maturity of less than 90 days, they are presented as an
investment with a maturity of less than 6 months.
(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.
34
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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 $ 200,490
General Capital Projects Fund 186,700
General Capital Reserve Fund
Developer donations - future capital projects 115,129
Total governmental activities 502,319
Business -type activities:
Water and Sewer Fund
Unspent debt proceeds 3,891,590
Customer deposits 583,611
Developer donations - perpetual maintenance 407,338
Developer donations - water and sewer needs 5,450,028
Total business -type activities 10,332,567
Total restricted cash $ 10.834,886
(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, 2018. 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.
35
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 the following 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
(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 has two items that meet this criterion: pension deferrals for the 2020 fiscal year,
and OPEB deferrals for the 2020 fiscal year. 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, pension deferrals and OPEB deferrals.
(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.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances
are reported as other financing uses. Issuance costs, whether withheld from the actual debt proceeds received or
not, are reported as debt service expenditures.
(io) 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
36
Town of Hillsborough, North Carolina
Notes to Financial Statements
liability for compensated absences and the salary -related payments are recorded as the leave is earned. The Town
has assumed a first -in, first -out method of using accumulated compensated time. The portion of that time that is
estimated to be used in the next fiscal year has been designated as a current liability and included in the long-term
liabilities due within one year on the government -wide financial statements.
The Town's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leave does not vest,
but any unused sick leave accumulated at the time of retirement may be used in determination of length of service
for retirement benefit purposes. Since the Town has no obligation for the accumulated sick leave until it is actually
taken, no accrual for sick leave has been made.
(11) Net position/fund balances
Net position
Net position in government -wide and proprietary fund financial statements is classified as net investment in capital
assets, restricted, and unrestricted. Restricted net position represent constraints on resources that are either
externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by
law through state statute.
Fund balances
In the governmental fund financial statements, fund balance is comprised of five classifications designed to disclose
the hierarchy of constraints placed on how the fund balance can be spent.
The governmental fund types classify fund balances as follows:
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 — North Carolina G.S. 159-8 prohibits units of government from
budgeting or spending a portion of their fund balance. This is one of several statutes enacted by the North
Carolina State Legislature in the 1930's that were designed to improve and maintain the fiscal health of
local government units. Restricted by State statute (RSS), is calculated at the end of each fiscal year for all
annually budgeted funds. The calculation in G.S. 159-8(a) provides a formula for determining what portion
of fund balance is available for appropriation. The amount of fund balance not available for appropriation is
what is known as "restricted by State statute". Appropriated fund balance in any fund shall not exceed the
sum of cash and investments minus the sum of liabilities, encumbrances, and deferred revenues arising
from cash receipts, as those figures stand at the close of the fiscal year next preceding the budget. Per
GASB guidance, RSS is considered a resource upon which a restriction is "imposed by law through
constitutional provisions or enabling legislation." RSS is reduced by inventories and prepaids as they are
classified as nonspendable. Outstanding Encumbrances are included within RSS. RSS is included as a
component of Restricted Net position and Restricted fund balance on the face of the balance sheet.
Restricted for 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.
37
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 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. Unassigned fund balance is the residual classification for the General Fund. Other
governmental funds cannot report positive unassigned fund balance but can report negative unassigned fund
balance if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to
those purposes.
The Town of Hillsborough has a revenue -spending policy that provides guidance for programs with multiple revenue
sources. The Finance Officer will use resources in the following hierarchy: bond and installment financing proceeds,
federal funds, state funds, local non -town funds, and town funds. For purposes of fund balance classification,
expenditures are to be spent from restricted fund balance first, followed in order by committed fund balance,
assigned fund balance and, finally, unassigned fund balance. The Finance Officer has the authority to deviate from
this policy, if it is in the best interest of the Town.
The Town of Hillsborough has adopted a minimum fund balance policy for the General Fund which instructs
management to conduct the business of the Town in such a manner that available fund balance is between 20%
and 60% of operating expenditures, with a target of 33%, or the equivalent of four months of operating expenditures.
(12) Defined benefit cost -sharing plans
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 debt transactions and are summarized
below:
General government
Public safety
Transportation
Environmental protection
Community activities and projects
Parks and recreation
Debt service:
Principal retirement
Interest and fiscal charges
(1) Reclassification of debt service payments.
Exhibit 4
$ 1,939,539
5,006,500
684,311
462,129
250,962
511,512
846,287
121,076
Increase
(Decrease)
$ 282,482
227,608
41,018
76,323
98,791
241,141
(846,287) (1)
(121,076) (1)
Exhibit 5
$ 2,222,021
5,234,108
725,329
538,452
349,753
752,653
38
Town of Hillsborough, North Carolina
Notes to Financial Statements
3. Detail Notes on All Funds
A. Assets
(i) Deposits and Investments
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, 2020, the Town's deposits had a carrying amount of $5,801,773 and a bank balance of $6,253,903. Of
the bank balance, $518,176 was covered by federal depository insurance and $5,735,727 in interest -bearing
deposits were covered under the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2020.
At June 30, 2020, the Authority's deposits had a carrying amount and bank balance of $258,470. All of the bank
balance was covered by federal depository insurance.
At June 30, 2020, the Board's deposits had a carrying amount of $359,586 and a bank balance of $359,845. Of the
bank balance, $250,000 was covered by federal depository insurance, and $109,845 of demand deposits were
covered under the Pooling Method.
Investments
At June 30, 2020, the Town's investment balances were as follows:
Investments by Type
Valuation Book
Measurement Value at
Method 6/30/2020 Maturity Rating
NC Capital Management Trust - Fair Value
Government Portfolio Level 1 $ 16,710,902 N/A AAAm
NC Capital Management Trust - Term Fair Value
Portfolio Level 1 1,024,419 0.15 years Unrated
NC Capital Management Trust — Fair Value
Government Portfolio - Capital Reserve Level 1 6,630,069 N/A AAAm
NC Capital Management Trust —Government Fair Value
Portfolio —Perpetual Maintenance Level 1 817,192 N/A AAAm
Total $ 25,182,582
All investments are measured using the market approach: using prices and other relevant information generated by
market transactions involving identical or comparable assets of a group of assets.
39
Town of Hillsborough, North Carolina
Notes to Financial Statements
Level of fair value hierarchy:
Level 1 - Debt securities are valued using directly observable, quoted prices (unadjusted) in active markets
for identical assets.
The Town does not have a formal investment policy.
Credit Risk. The Town has no formal policy regarding credit risk, but has internal management procedures that
limits the Town's investments to the provisions of G.S. 159-30 and restricts the purchase of securities to the highest
possible ratings whenever particular types of securities are rated. The Town's investment in the NC Capital
Management Trust Government Portfolio carried a credit rating of AAAm by Standard & Poor's as of June 30, 2020.
The Town's investment in the NC Capital Management Trust Term Portfolio is unrated. The Term Portfolio is
authorized to invest in obligations of the U.S. government and agencies, and in high grade money market
instruments permitted under NC G.S. 159-30 as amended.
(3) Due from other governments
Amounts due from other governments consist of the following:
Governmental
Activities
General Fund:
Sales and use tax distribution $ 463,462
Utilities franchise and telecommunications tax 134,215
Other government agencies 96,518
Sales tax refunds 129,005
823,200
Riverwalk CMAQ Capital Project Fund
CMAQ grant funds 165,441
$ 988,641
(4) Receivables - allowances for doubtful accounts
The amounts presented in the Balance Sheet and the Statement of Net Position for the year ended June 30, 2020
are net of the following allowances for doubtful accounts:
General Fund:
Taxes receivable
Water and Sewer Enterprise Fund
$ 43,668
$ 67,101
40
Town of Hillsborough, North Carolina
Notes to Financial Statements
(5) Capital assets
Governmental capital asset activity for the year ended June 30, 2020 was as follows:
Governmental activities:
Capital assets not
being depreciated:
Land
Construction -in -
progress
Total capital assets
not being depreciated
Capital assets being
depreciated:
Buildings and
improvements
Infrastructure
Equipment
Vehicles
Total capital assets
being depreciated
Less accumulated
depreciation for:
Buildings and
improvements
Infrastructure
Equipment
Vehicles
Beginning
Balances
Increases
$ 4,634,594 $
49,297
96,395
Decreases
$
Transfers
Ending
Balances
$ 23,187 $ 4,657,781
4,683,891 $ 96.395 $ $ 23,187
8,722,959 $
12,845,332
951,474
4,278,378
26,798,143 $
210,150
19,890
89,714
$
$ 208,674
7,384
145,692
4,803,473
8,931,633
13,062,866
971,364
4,368,092
319,754 $ - $ 216.058 27,333,955
2,436,914 $ 294,112 $
1,086,094 323,358
561,609 84,184
3,400,057 377,955
Total accumulated
depreciation 7,484,674 $ 1,079.609
Total capital assets
being depreciated, net 19,313,469
Governmental activity
capital assets, net $ 23.997.360
$
$
$
Depreciation expense was charged to functions/programs of the primary government as follows:
General government
Public safety
Transportation
Economic and physical development
Environmental protection
$ 251,487
338,257
324,164
84,115
81,586
$ 1,079,609
2,731,026
1,409,452
645,793
3,778,012
8,564,283
18,769,672
$ 23,573.145
41
Town of Hillsborough, North Carolina
Notes to Financial Statements
Business -type capital asset activity for the year ended June 30, 2020 was as follows:
Beginning
Balances
Increases
Ending
Decreases Transfers Balances
Business -type activities:
Capital assets not being
amortized or depreciated:
Land $ 6,132,444 $ 39,015 $ 61,371 $ 23,000 $ 6,133,088
Construction -in -progress 9,205,410 1,861,711 - 11,067,121
Total capital assets not
being amortized or
depreciated 15,337,854 $ 2.248,198 $ 61,371 $ 23 000 17,200,209
Capital assets being
amortized or depreciated:
Buildings and
improvements 28,110,010 $ 26,183 $
Plant and distribution
systems 35,302,307 539,500
Infrastructure 2,873,050 -
Equipment 1,665,614 248,176
Vehicles 1,022,759 52,236
Total capital assets being
amortized or depreciated
6,657
17,820
$ (208,674) 27,927,519
35, 835,150
2,873,050
(20,538) 1,893,252
1,057,175
68,973,740 $ 866,095 $ 24.477 $ (229.212) 69,586,146
Less accumulated
depreciation and
amortization for:
Buildings and
improvements 10,194,484 $ 810,285 $ - $ - 11,004,769
Plant and distribution
systems 9,884,983 651,053 - - 10,536,036
Infrastructure 406,851 70,568 477,419
Equipment 1,385,946 99,892 - 1,485,838
Vehicles 703,812 120,835 1,373 823,274
Total accumulated
depreciation and
amortization 22,576,076 $ 1,752,633 $ 1,371 $ 24,327,336
Depreciable assets, net
Business -type activity
capital assets, net
46,397,664 45,258,810
$ 61,735.518 $ 62.459.019
(6) Construction commitments
The Town has active construction projects as of June 30, 2020 with the following remaining commitments:
Project
Carr Mill St - Atkins
Orange Grove Churton Sewer
Remaining
Spent to Date Commitment
$ 120,154 $ 59,569
283,532 14,923
Total $ 403,686 $ 74,492
42
Town of Hillsborough, North Carolina
Notes to Financial Statements
B. Liabilities
(1) Pension plans 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 (LEDs) 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.
LGERS plan members who are LEOs are eligible to retire with full retirement benefits at age 55 with five years of
creditable service as an officer, or at any age with 30 years of creditable service. LEO plan members are eligible
to retire with partial retirement benefits at age 50 with 15 years of creditable service as an officer. Survivor benefits
are available to eligible beneficiaries of LEO members who die while in active service or within 180 days of their
last day of service and who also have either completed 20 years of creditable service regardless of age, or have
completed 15 years of service as a LEO and have reached age 50, or have completed five years of creditable
service as a LEO and have reached age 55, or have completed 15 years of creditable service as a LEO if killed in
the line of duty. Eligible beneficiaries may elect to receive a monthly Survivor's Alternate Benefit for life or a return
of the member's contributions.
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, 2020 was 9.70% of compensation for law
enforcement officers and 8.95% 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 $587,827 for the year ended June 30, 2020.
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.
43
Town of Hillsborough, North Carolina
Notes to Financial Statements
Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources
related to pensions
At June 30, 2020, the Town reported a liability of $2,472,850 for its proportionate share of the net pension liability.
The net pension liability was measured as of June 30, 2019. The total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of December 31, 2018. The total pension liability was
then rolled forward to the measurement date of June 30, 2019 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, 2019 (measurement date), the
Town's proportion was 0.09055%, which was a decrease of 0.00258% from its proportion measured as of June 30,
2018.
For the year ended June 30, 2020, the Town recognized pension expense of $1,113,523. At June 30, 2020, the
Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the
following sources:
Differences between expected and actual experience
Changes of assumptions
Net difference between projected and actual earnings on pension
plan investments
Changes in proportion and differences between Town contributions
and proportionate share of contributions
Town contributions subsequent to the measurement date
Total
Deferred
Outflows of
Resources
$ 423,415
403,034
60,316
5,976
587,828
Deferred
Inflows of
Resources
32,451
$ 1,480,569 $ 32,451
$587,828 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,
2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized
in pension expense as follows:
Year Ending June 30:
2021
2022
2023
2024
2025
Thereafter
$ 439,272
128,279
231,248
61,491
$ 860,290
Actuarial assumptions. The total pension liability in the December 31, 2018 actuarial valuation was determined
using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation
Salary increases
Investment rate of return
3.0 percent
3.50 to 8.10 percent, including inflation and productivity factor
7.00 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
44
Town of Hillsborough, North Carolina
Notes to Financial Statements
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, 2018 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, 2019 are summarized in the following table:
Asset Class
Fixed income
Global equity
Real estate
Alternatives
Credit
Inflation protection
Total
Long -Term
Expected
Target Real Rate
Allocation of Return
29.0%
42.0%
8.0%
8.0%
7.0%
6.0%
100.0%
1.4%
5.3%
4.3%
8.9%
6.0%
4.0%
The information above is based on 30 -year expectations developed with the consulting actuary for the 2018 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 3.05%. All rates
of return and inflation are annualized.
Discount rate. The discount rate used to measure the total pension liability was 7.00%. 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 7.00
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 (6.00 percent) or one percentage point
higher (8.00 percent) than the current rate:
45
Town of Hillsborough, North Carolina
Notes to Financial Statements
1% Discount 1%
Decrease Rate Increase
(6.00%) (7.00%) (8.00%)
Town's proportionate share of the net pension
liability (asset) $ 5,655,860 $ 2,472,850 $ (172,876)
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
(i) 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,
2018 valuation date, the Separation Allowance's membership consisted of:
Retirees receiving benefits
Terminated plan members entitled to, but not yet receiving benefits
Active plan members
2
29
Total 31
(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 are recognized when due and payable in accordance with the terms of the plan.
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, 2018 valuation. The total pension liability in the
December 31, 2018 actuarial valuation was determined using the following actuarial assumptions, applied to all
periods included in the measurement:
Inflation 2.50 percent
Salary increases 3.50 to 7.35 percent, including inflation and productivity factor
Discount rate 3.26 percent
The discount rate is based on the yield of the S&P Municipal Bond 20 Year High Grade Rate Index as of
December 31, 2018.
Mortality rates are based on the RP -2014 series mortality tables with adjustments for mortality improvements based
on Scale AA.
46
Town of Hillsborough, North Carolina
Notes to Financial Statements
(iv) Change in actuarial assumptions:
On the prior measurement date (December 31, 2018), the Municipal Bond Index Rate, on which the discount rate
is based, was 3.64%. Since the Prior Measurement Date, the Municipal Bond Index Rate has increased to 3.26%
as of the Measurement Date (December 31, 2019). This resulted in a $25,289 increase 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 $13,652 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, 2020, the Town reported a total pension liability of $783,583. The total pension liability was measured
as of December 31, 2019 based on a December 31, 2018 actuarial valuation. The total pension liability was then
rolled forward to the measurement date of December 31, 2019 utilizing update procedures incorporating the
actuarial assumptions. For the year ended June 30, 2020, the Town recognized pension expense of $79,585.
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 53,695 $ 23,983
Changes of assumptions 44,165 25,064
Town benefit payments and plan administrative expense
made subsequent to the measurement date 11,393
Total
$ 109,253 $ 49,047
The $11,393 paid as benefits came due subsequent to the measurement date have been reported as deferred
outflows of resources. Other amounts reported as deferred outflows and deferred inflows of resources related to
pensions will be recognized in pension expense as follows:
Year Ending
June 30,
2021 $ 13,133
2022 13,133
2023 14,597
2024 7,974
2025 (24)
Thereafter
Total
$ 48,813
(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 3.26 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 (2.26 percent) or 1 -percentage -point higher (4.26 percent) than the current rate:
47
Town of Hillsborough, North Carolina
Notes to Financial Statements
1%
Decrease
(2.26%)
Discount
Rate
(3.26%)
1%
Increase
(4.26%)
Total pension liability $ 854.415 $ 783,583 $ 718.882
Schedule of Changes in Total Pension Liability
Law Enforcement Officers' Special Separation Allowance
Beginning balance
Service cost
Interest on the total pension liability
Changes of benefit terms
Differences between expected and actual experience in the
measurement of the total pension liability
Changes of assumptions or other inputs
Benefit payments
Ending balance of the total pension liability
2020
$ 727,333
46,881
26,226
(28,494)
25,289
(13,652)
$ 783,583
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.
The actuarial assumptions used in the December 31, 2018 valuation were based on the results of an
experience study completed by the Actuary for the Local Government Employees' Retirement System
for the five year period ending December 31, 2014.
(c) Total expense, liabilities and deferred outflows and inflows of resources related to pensions
Following is information related to the proportionate share and pension expense for all pension plans:
LGERS LEOSSA Total
Pension expense $ 1,113,523
Pension liability 2,472,850
Proportionate share of net pension liability 0.09055%
Deferred outflows of resources
Differences between expected and actual
experience
Changes of assumptions
Net difference between projected and actual
earnings on plan investments
Changes in proportion and differences
between contributions and proportionate
share of contributions
Benefit payments and administrative costs paid
subsequent to the measurement date
$ 423,415
403,034
60,316
5,976
587,828
$ 79,585
783,583
N/A
$ 1,193,108
3,256,433
N/A
$ 53,695 $ 477,110
44,165 447,199
60,316
5,976
11,393 599,221
48
Town of Hillsborough, North Carolina
Notes to Financial Statements
Deferred inflows of resources
Differences between expected and
actual experience
Changes in proportion and differences
between employer contributions and
proportionate share of contributions
Change of Assumptions
23,983 23,983
32,451
- 25,064
32,451
25,064
(d) 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, 2020 were $536,658, which
consisted of $317,250 from the Town and $219,408 from employees.
(2) Other postemployment benefit
Healthcare Benefits
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 9, 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 9, 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.
Retired Employees' Years
of Creditable Service
Less than 20 years' continuous service
20 or more years' continuous service:
Before age 52
Age 52 to 55
Age 55 until eligible for Medicare
30 or more years' continuous service:
Before age 57
Law Enforcement
Hired Before
February 9,
2009
Hired On
or After
February 9,
2009
Not eligible for Not eligible for
coverage coverage
Not eligible for Not eligible for
coverage coverage
Full coverage Not eligible for
paid for by Town coverage
Full coverage Not eligible for
paid for by Town coverage
Full coverage Not eligible for
paid for by Town coverage
Non -Law
Enforcement
Hired Before
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Full coverage
paid for by Town
Hired On
or After
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
49
Town of Hillsborough, North Carolina
Notes to Financial Statements
Age 57 to 60
Age 60 until eligible for Medicare
Full coverage Full coverage Full coverage Not eligible for
paid for by Town paid for by Town paid for by Town coverage
Full coverage Full coverage Full coverage Full coverage
paid for by Town paid for by Town paid for by Town paid for by Town
Membership of the HC Plan consisted of the following at June 30, 2019, the date of the latest actuarial valuation:
Retirees and dependents receiving benefits
Active plan members
Law
General Enforcement
Employees Officers
3 2
74 31
Total 77 33
Total OPEB liability
The Town's total OPEB liability of $1,175,291 was measured as of June 30, 2019 and was determined by an
actuarial valuation as of June 30, 2019.
Actuarial assumptions and other inputs. The total OPEB liability in the June 30, 2019 actuarial valuation was
determined using the following actuarial assumptions and other inputs, applied to all periods included in the
measurement unless otherwise specified:
Inflation 2.50 percent, including real wage growth
Salary increases 3.50 to 7.75 percent, including inflation and productivity factor
Discount rate 3.50 percent
Healthcare cost trend rates 7.00% decreasing to an ultimate rate of 4.50% by 2026
The discount rate is based on the June average of the Bond Buyer General Obligation 20 -year Municipal Bond
Index published weekly by The Bond Buyer.
Changes in the total OPEB liability
Beginning balance at July 1, 2019 $ 1,634,361
Service cost 55,104
Interest on the total OPEB liability 60,865
Changes of benefit terms
Differences between expected and actual experience in the
measurement of the total OPEB liability (461,361)
Changes of assumptions or other inputs 27,076
Benefit payments (140,755)
Ending balance of the total OPEB liability at June 30, 2020 $ 1 175 290
Changes in assumptions and other inputs reflect a change in the discount rate from 3.89% to 3.50%.
Mortality rates were based on the RP -2014 mortality tables, with adjustments for experience and generational
mortality improvements using Scale MP -2015.
The demographic actuarial assumptions for retirement, disability incidence, withdrawal, and salary increases used
in the June 30, 2019 valuation were based on the results of an actuarial experience study for the period January 1,
2010 - December 31, 2014, adopted by the LGERS Board.
50
Town of Hillsborough, North Carolina
Notes to Financial Statements
The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rate of plan participation,
rates of plan election, etc.) used in the June 30, 2019 valuation were based on a review of recent plan experience
done concurrently with the June 30, 2019 valuation.
Sensitivity of the total OPEB liability to changes in the discount rate. The following presents the total OPEB liability
of the Town, as well as what the Town's total OPEB liability would be if it were calculated using a discount rate that
is 1 percentage point lower (2.50 percent) or 1 percentage point higher (4.50 percent) than the current rate:
Total OPEB liability
1%
Decrease
(2.50%)
$ 1,271,219
Discount
Rate
(3.50%)
1%
Increase
(4.50%)
$ 1.175,290 $ 1,087,104
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following presents the total
OPEB liability of the Town, as well as what the Town's total OPEB liability would be if it were calculated using a
discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:
1%
Decrease
Current
Healthcare
Trend Rate
1%
Increase
Total OPEB liability $ 1,065.858 $ 1.175.190 $ 1,300,853
OPEB expense and deferred outflows of resources and deferred inflows of resources related to OPEB
For the year ended June 30, 2020, the Town recognized OPEB expense of $101,029. At June 30, 2020, the Town
reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following
sources:
Differences between expected and actual experience
Changes of assumptions
Benefit payments and administrative costs made subsequent
to the measurement date
Total
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
$ 6,747 $ 412,019
24,020 86,896
51,931
$ 82,698 $ 498.915
$51,931 reported as deferred outflows of resources related to OPEB resulting from benefit payments made and
administrative expenses incurred subsequent to the measurement date will be recognized as a decrease of the
total OPEB liability in the year ended June 30, 2021. Other amounts reported as deferred inflows of resources
related to OPEB will be recognized in OPEB expense as follows:
Year Ending
June 30,
2021
2022
2023
2024
2025
Thereafter
Total
$ (61,176)
(61,176)
(61,176)
(61,176)
(61,176)
(162,268)
$ (468,148)
51
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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.
(4) Accounts payable and accrued liabilities
Accounts payable and accrued liabilities at June 30, 2020 were as follows:
(5)
Payable to vendors and others
Accrued claims and judgments
Accrued payroll and related liabilities
Total accounts payable and accrued liabilities
Deferred outflows and inflows of resources
Governmental
Activities
Business -
Type
Activities
Total
$ 152,924 $ 356,389 $ 509,313
222,599 102,239 324,838
$ 375,523 $ 458,628 $ 834,151
Deferred outflows of resources at year end is comprised of the following:
Contributions to pension plan in current fiscal year
Benefit payments and administrative expenses for LEOSSA made
subsequent to measurement date
Benefit payments made for OPEB subsequent to measurement date
Differences between actual and expected experience
Changes in proportion and differences between contributions
and proportionate share of contributions
Changes of assumptions
Net difference between projected and actual earnings on pension
plan investments
Total
Deferred
Outflows
$ 587,828
11,393
51,931
483,857
5,976
471,219
60,316
$ 1,672,520
52
Town of Hillsborough, North Carolina
Notes to Financial Statements
Deferred inflows of resources at year end is comprised of the following:
Governmental
Statement of Funds
Net Position Balance Sheet
Taxes receivable, less penalties
Capital grant funds receivable but unavailable
Changes in assumptions
Changes in proportion and differences between Town
contributions and proportionate share of contributions
Differences between expected and actual experience
Total
- $ 153,685
111,960
32,451
436,002
$ 580,413 $ 153,685
(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 ($55,875,094); general liability
($5 million per occurrence); law enforcement liability ($5 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 ($985,307); fine arts
($500,000); and public officials' liability ($5 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.
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.
53
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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. $ 245,200
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%. $ 146,018
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%. 328,338
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. 214,803
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. 389,733
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. 49,810
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. 99,861
Note payable to BB&T, executed September 2017, in the amount of
$465,522 for the purchase of police vehicles. The note is payable
in nine semi-annual payments of $54,509 with interest payable at
1.86%, and is secured by the vehicles. 265,102
54
Town of Hillsborough, North Carolina
Notes to Financial Statements
Note payable to Capital One, executed April 2018, in the amount of
$2,770,000 to finance renovations for the Town's North Campus
location and the Town Barn. The note is payable in fifteen annual
payments of $239,296 with interest payable at 3.56%, and is
secured by the mortgaged property. This note is allocated 83.65%
to governmental activities, and 16.35% to business -type activities,
and accordingly, the annual payments made out of the general fund
will be $200,171, which commenced on January 1, 2019.
Less current portion
2,054,535
3,793,400
(735,839)
$ 3.057,561
The future minimum payments on the notes payable as of June 30, 2020 are as follows:
Year Ending June 30, Principal
2021
2022
2023
2024
2025
2026 - 2030
2031 - 2033
Business -type activities:
Enterprise fund - Water/Sewer Fund:
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.
Note payable to Capital One, executed April 2018, in the amount
of $2,770,000 to finance renovations for the Town's North
Campus location and the Town Barn. The note is payable in
fifteen annual payments of $239,296 with interest payable at
3.56%, and is secured by the mortgaged property. This note is
allocated 83.65% to governmental activities, and 16.35% to
business -type activities, and accordingly, the annual payments
made out of the general fund will be $200,171, which
commenced on January 1, 2019.
Less current portion
$ 735,839
573,197
427,683
275,932
223,614
996,973
560,162
Interest
$ 109,958
92,943
79,528
68,927
60,711
201,784
40,349
Total
$ 845,797
666,140
507,211
344,859
284,325
1,198,757
600,511
$ 3,793.400 $ 654.200 $ 4,447,600
$ 22,260
401,573
423,833
(47,089)
$ 376.744
55
Town of Hillsborough, North Carolina
Notes to Financial Statements
The long-term debt requirements to maturity as of June 30, 2020 for the Enterprise Fund are as follows:
Year Ending June 30, Principal Interest Total
2021 $ 47,089 $ 14,548 $ 61,637
2022 25,713 13,412 39,125
2023 26,628 12,497 39,125
2024 27,576 11,549 39,125
2025 28,558 10,567 39,125
2026 - 2030 158,782 36,842 195,624
2031 - 2033 109,487 7,886 117,373
$ 423,833 $ 107,301 $ 531.134
a. The provisions of this loan agreement contain certain financial covenants related to the maintenance of fund
balance. At June 30, 2020, the Town was in compliance with such covenants.
b. General obligation indebtedness
The Town's legal debt margin at June 30, 2020 was $89,551,324.
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, 2020 was $457,335.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2020 are as follows:
Business -Type Activities
Year Ending June 30,
Principal Interest Total
2021 $ 76,222 $ 12,166 $ 88,388
2022 76,222 10,138 86,360
2023 76,222 8,110 84,332
2024 76,222 6,082 82,304
2025 76,222 4,056 80,280
2026 76,225 2,028 78,251
$ 457,335 $ 42,580 $ 499,915
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, 2020 was $12,467,005.
56
Town of Hillsborough, North Carolina
Notes to Financial Statements
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2020 are as follows:
Business -Type Activities
Year Ending June 30,
2021
2022
2023
2024
2025
2026 - 2030
2031 - 2034
Principal Interest
$ 890,500
890,500
890,500
890,500
890,500
4,452,500
3,562,005
$ 306,064
284,204
262,342
240,480
218,618
765,160
218,620
Total
$ 1,196, 564
1,174, 704
1,152, 842
1,130,980
1,109,118
5,217,660
3,780,625
$ 12,467,005 $ 2,295,488 $ 14,762,493
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. The first payment was made on the note in April 2016. The loan is repayable in a
principal payment of $72,078 due on May 1, 2019, followed by equal principal payments of $94,122 annually on
May 1st, with no interest, through fiscal year ending 2035. The total amount outstanding at June 30, 2020 was
$1,411,828.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2020 are as follows:
Year Ending June 30,
2021
2022
2023
2024
2025
2026 - 2030
2031 - 2034
Business -Type Activities
Principal Interest
$ 94,122 $
94,122
94,122
94,122
94,122
470,610
470,608
Total
$ 94,122
94,122
94,122
94,122
94,122
470,610
470,608
$ 1.411 828 $ - $ 1,411,828
d. Special revenue bonds payable
On May 24, 2018, the City issued $10,155,000 of special revenue bonds secured by water and sewer utility
revenues for improvements to the water and sewer system, including renovation and expansion of the Town's West
Fork of the Eno Reservoir; $6,500,000 were issued as serial bonds and $3,655,000 were issued as term bonds.
The purchase price of the bonds was $11,180,846, resulting in a premium upon issuance of $1,025,846. The serial
bonds carry interest rates of 4.00% to 5.00% and mature between October 1, 2020, and October 1, 2038. The term
bonds were divided into two lots with $1,765,000 paying 3.375% due between October 1, 2039 and October 1,
2040, and $1,890,000 paying 3.50% due between October 1, 2041 and October 1, 2042. All term bonds are subject
to mandatory redemption in prescribed amounts before the maturity dates. $10,155,000 remains outstanding at
June 30, 2020.
57
Town of Hillsborough, North Carolina
Notes to Financial Statements
Annual debt service requirements to maturity for these special revenue bonds payable as of June 30, 2020 are as
follows:
Business -Type Activities
Year Ending June 30,
2021
2022
2023
2024
2025
2026 - 2030
2031 - 2035
2036 - 2040
2041 - 2043
Principal Interest
$ 25,000
25,000
30,000
30,000
30,000
180,000
3,090,000
3,960,000
2,785,000
$ 449,969
448,844
447,469
445,969
444,469
2,197, 344
1,802,594
932,413
147,928
Total
$ 474,969
473,844
477,469
475,969
474,469
2,377,344
4,892,594
4,892,413
2,932,928
$ 10,155.000 $ 7 316.999 $ 17 471.999
e. Combined Utility Systems Revenue Bond, Series 2020
On February 12, 2020, the City issued $3,271,000 of special revenue bonds secured by water and sewer utility
revenues for road improvements near the Town's water reservoir, as part of the comprehensive plan to improve
and expand the reservoir. The bonds carry an interest rate of 1.98% and mature April 1, 2030. $3,271,000 remains
outstanding at June 30, 2020.
Annual debt service requirements to maturity for these special revenue bonds payable as of June 30, 2020 are as
follows:
Year Ending June 30,
2021
2022
2023
2024
2025
2026 - 2030
f. Debt Covenant
Business -Type Activities
Principal Interest
$ 292,000
307,000
310,000
317,000
325,000
1,720,000
$ 73,581
58,984
52,906
46,768
40,491
103,376
$ 3.271.000 $
Total
$ 365,581
365,984
362,906
363,768
365,491
1,823,376
376106 $ 3.647.106
The Town is in compliance with the covenants as to rates, fees, rentals and charges in Section 4 of the Master
Trust Agreement, authorizing the issuance of the Water and Sewer Revenue Bonds, Series 2018. Section 4.03 of
the Master Trust Agreement requires the sum of the income available for debt service and 15% of the system fund
balance to be no less than 120% of the long-term debt service requirement for parity indebtedness and the income
available for debt service will be not less than the sum of the long-term debt service requirement for parity
indebtedness and subordinate indebtedness and the debt service on all installment debt and system general
obligation debt.
58
Town of Hillsborough, North Carolina
Notes to Financial Statements
The debt service coverage ratio calculation is as follows:
Operating revenues
Operating expenses **
Operating income
Nonoperating revenues (expenses)
Income available for debt service
15% of Unrestricted Net Position*
Total Balance for 120% Parity
$ 10,722,494
(6,286,611)
4,435,883
(732,406)
3,703,477
1,557,794
$ 5,261,271
Debt service, principal and interest (Revenue bond only) $ 450,468
Debt service coverage ratio on first -lien debt 11.68
Debt service all debt (total balance for 100%) $ 1,999,969
Debt service coverage ratio on all debt together 1.85
*System Fund Balance
** Depreciation excluded from operating expenses
g.
Changes in long-term debt
Balance
July 1, 2019
Governmental activities:
Direct placement installment
purchases $
Compensated absences
Other postemployment
benefits
Net pension liability
(LGERS)
Total pension liability
(LEOSSA)
4,632,280
333,301
Increases
Decreases
$ - $
202,670
1,022,172
1,513,849 177,035
727,333 56,250
$ 8,228,935
Business -type activities:
Direct placement installment
purchases $
Revolving loans payable
Special revenue bonds
payable
Premium on bonds payable
Other postemployment
benefits
Net pension liability
(LGERS)
Compensated absences
$ 435.955
552,936 $
15,397,010
10,155,000
970,330
612,189
695,513
264,777
$ 28.647.755
3,271,000
86,453
72,230
$ 3,429,683
Balance
June 30, 2020
838,880 $
214,005
308,467
Current
Portion of
Long -Term
Liabilities
3,793,400 $ 735,839
321,966 208,854
713,705
1,690,884
783,583
$ 1.361.352 $ 7.303,538 $ 944,693
$ 129,103 $ 423,833
1,060,843 14, 336,167
56,689
150,627
105,422
$ 1,502,684
13,426,000
913,641
461,562
781,966
231,585
$ 47,089
1,060,844
317,000
56,627
105,422
$ 30.574,754 $ 1,586,982
Compensated absences, the total pension liability (LEOSSA), and net pension liability (LGERS) for governmental
activities have typically been liquidated in the General Fund.
59
Town of Hillsborough, North Carolina
Notes to Financial Statements
h. 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, 2020, $1,946,000 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 Ending
June 30,
2021 71,284
2022 141,306
Rent expense under operating leases for the year ended June 30, 2020 was $72,484.
C. Interfund balances and activity
Transfers to/from other funds
Transfers to/from other governmental funds at June 30, 2020 consist of the following:
To the General Fund from the Town Barn Improvement Capital
Project Fund $ 55,368
To the General Fund from the Downtown Improvements Capital
Project Fund 36,487
From the General Fund to the Riverwalk CMAQ Capital Projects
Fund for grant matching funds (50,343)
From the General Fund to the General Capital Projects Fund for
future connectivity projects (80,000)
From the General Fund to the Public Safety Facility Capital Project
Fund (312,000)
$ (350,488)
Transfers to (from) the governmental fund to the proprietary funds at June 30, 2020 consist of the following:
From the Town Barn Improvements Capital Project Fund
From the Water and Sewer Fund
D. Net investment in capital assets
Capital assets
Less: related debt
Installment purchases
Revolving loans payable
Special revenue bonds payable
Construction retainage payable
Add: unexpended debt proceeds
$ (10,822)
208,674
$ 197,852
Governmental Business -Type
$ 23,573,145 $ 62,459,019
(3,793,400)
(423,833)
(14,336,167)
(13,426,000)
(14,923)
3,891,390
Net investment in capital assets $ 19,779,745 $ 38.149,486
60
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 $ 8,657,702
Less:
Stabilization by state statute 1,081,435
Streets - Powell Bill 200,490
Appropriated fund balance in subsequent fiscal year's budget 749,550
Working capital/fund balance policy 6,626,227
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
4. Jointly Governed Organization
$ 37,965
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 $2,872 to the Council during the fiscal year ended
June 30,2020.
5. Contingencies
During 2020, an outbreak of a novel strain of coronavirus ("COVID-19") emerged globally. As a result of the spread
of COVID-19, economic uncertainties have arisen that could negatively impact the Board's revenue and operations
for an indeterminable period of time. Other financial impacts could occur that are unknown at this time.
6. Subsequent Events
The Town of Hillsborough has evaluated all subsequent events for potential recognition and disclosure through
November 18, 2020, the date these financial statements will be available.
61
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 Changes in the Total OPEB Liability and Related Ratios.
• Schedule of Proportionate Share of Net Pension Liability (Asset) for Local Government Employees' Retirement
System
• Schedule of Contributions to Local Government Employees' Retirement System
62
Town of Hillsborough, North Carolina
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Schedules of Changes in Total Pension Liability
Last Four Fiscal Years
Exhibit A
2020 2019 2018 2017
Beginning balance $ 727,333 $ 641,574 $ 566,336 $ 556,718
Service cost 46,881 49,048 37,358 36,956
Interest on the total pension liability 26,226 19,749 21,303 19,286
Changes of benefit terms - -
Differences between expected and actual
experience in the measurement of the
total pension liability (28,494) 80,147 (520) -
Changes of assumptions or other inputs 25,289 (29,947) 45,993 (13,621)
Benefit payments (13,652) (33,238) (28,896) (33,003)
Other changes - -
Ending balance of the total pension liability $ 783,583 $ 727,333 $ 641,574 $ 566,336
Notes to the Schedules:
The amounts presented for each fiscal year were determined as of the prior fiscal year ended December 31.
63
Town of Hillsborough, North Carolina
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Schedules of Total Pension Liability as a Percentage of Covered Payroll
Last Four Fiscal Years
Exhibit B
2020 2019 2018 2017
Total pension liability $ 783,583 $ 727,333 $ 641,574 $ 566,336
Covered payroll
Total pension liability as a percentage of
covered payroll
1,831,895 1,830,296 1,670,805 1,650,937
42.77% 39.74% 38.40% 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.
64
Town of Hillsborough, North Carolina
Schedule of Changes in the Total OPEB Liability and Related Ratios
Required Supplementary Information
June 30, 2020
Last three fiscal years
Exhibit C
Total OPEB Liability 2020 2019 2018
Service cost $ 55,105 $ 56,731 $ 60,886
Interest 60,865 56,550 48,567
Changes of benefit terms -
Differences between expected and actual
experience (461,361) 8,747 (2,066)
Changes of assumptions or other inputs 27,076 (45,522) (78,864)
Benefit payments (140,756) (60,738) (46,470)
Net change in total OPEB liability (459,071) 15,768 (17,947)
Total OPEB liability, beginning 1,634,361 1,618,593 1,636,540
Total OPEB liability, ending $ 1,175,290 $ 1,634,361 $ 1,618,593
Covered -employee payroll 5,736,330 $ 5,180,570 $ 5,180,570
Total OPEB liability as a percentage of covered -
employee payroll
20.49% 31.55% 31.24%
Notes to the Schedule:
*Changes of assumption and other inputs reflect the effects of changes in the discount rate of each period. The following
are the discount rates used in each period.
Fiscal Year Rate
2020 3.50%
2019 3.89%
2018 3.56%
65
Town of Hillsborough, North Carolina
Schedules of Proportionate Share of Net Pension Liability (Asset)
Local Government Employees' Retirement System
Required Supplementary Information
Last Seven Fiscal Years*
Exhibit D-1
Hillsborough's proportion of the net
pension liability (asset) (%)
Hillsborough's proportion of the net
pension liability (asset) ($)
Hillsborough's covered payroll
2020 2019 2018 2017 2016
0.0906% 0.0931% 0.0919% 0.0924% 0.0838%
$ 2,472,850 $ 2,209,362 $ 1,404,436 $ 1,961,038 $ 376,224
5,936,460 5,695,125 5,750,308 5,235,777 4,861,624
Hillsborough's proportionate share
of the net pension liability (asset)
as a percentage of its covered
payroll 41.66% 38.79% 24.42% 37.45% 7.74%
Plan fiduciary net position as a
percentage of the total pension
liability 90.68% 94.18% 91.47% 98.09% 99.07%
Hillsborough's proportion of the net
pension liability (asset) (%)
2015 2014
0.0809% 0.0797%
Hillsborough's proportion of the net
pension liability (asset) ($) $ (477,164) $ 960,691
Hillsborough's covered payroll
4,672,868 4,428,097
Hillsborough's proportionate share
of the net pension liability (asset)
as a percentage of its covered
payroll -10.21% 21.70%
Plan fiduciary net position as a
percentage of the total pension
liability 102.64% 94.35%
* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.
66
Town of Hillsborough, North Carolina
Schedules of Contributions
Local Government Employees' Retirement System
Required Supplementary Information
Last Seven Fiscal Years
Exhibit D-2
2020 2019 2018 2017 2016
Contractually required contribution $ 587,827 $ 478,756 $ 440,572 $ 429,432 $ 356,396
Contributions in relation to the
contractually required contribution
Contribution deficiency (excess)
Hillsborough's covered payroll
Contributions as a percentage of
covered payroll
587,827 478,756 440,572 429,432 356,396
$ $ $ $ $
$ 6,389,923 $ 5,936,460 $ 5,695,125 $ 5,750,308 $ 5,235,777
9.20% 8.06% 7.74% 7.47% 6.81%
2015 2014
Contractually required contribution $ 357,402 $ 333,343
Contributions in relation to the
contractually required contribution
357,402 333,343
Contribution deficiency (excess) $ - $ -
Hillsborough's covered payroll $ 4,861,624 $ 4,672,868
Contributions as a percentage of
covered payroll 7.35% 7.13%
67
Supplementary Information
68
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2020 with Comparative Actual Amounts for
Year Ended June 3o, 2019
Schedule 1
(5 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Revenues
General revenues:
Ad valorem taxes:
Current $ 7,127,579 $ 7,402,989 $ 275,410 $ 6,472,975
Prior - - 86
Penalties and interest 18,890 19,874 984 18,796
7,146,469 7,422,863
276,394 6,491,857
Other taxes and licenses:
Local option sales tax 1,476,003 1,719,865 243,862 1,708,025
Gross receipts on short-term
rental property 12,290 11,517 (773) 13,593
Privilege licenses 682 878 196 875
Motor vehicle license fees 644 674 30 892
Solid waste disposal 4,310 5,663 1,353 5,472
1,493,929 1,738,597 244,668 1,728,857
Unrestricted intergovernmental
revenues:
Franchise tax 319,831 585,296 265,465 632,575
Beer and wine tax 32,184 32,185 1 31,819
Food and beverage tax 350,000 399,918 49,918 397,640
Occupancy tax 53,600 62,107 8,507 73,225
Alliance Contingency Reimb. - 1,532 1,532 -
755,615 1,081,038 325,423 1,135,259
Restricted intergovernmental
revenues:
Powell Bill 202,395 202,395 199,965
Federal grants 8,221 32,487 24,266 21,710
State grants - - -
Covid Relief Funding 79,973 79,973 - -
Other 2,055 2,357 302 3,165
292,644 317,212 24,568 224,840
Investment earnings 170,000 170,325 325 248,824
Other general revenues 236,021 87,365 (148,656) 50,176
Total general revenues 10,094,678 10,817,400 722,722 9,879,813
69
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2020 with Comparative Actual Amounts for
Year Ended June 3o, 2019
Schedule 1
(5 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Functionally related revenues:
Use and rental fees:
Zoning permits $ 212,815 $ 215,487 $ 2,672 $ 95,363
Cable franchise 40,000 52,742 12,742 41,926
Time Warner Cable PEG fees - 27,353 27,353 20,270
Fire inspection fees 13,955 15,310 1,355 12,852
Affordable Housing 387,227 34,000 (353,227) 29,000
Total functionally related
revenues
Total revenues
653,997 344,892 (309,105) 199,411
10,748,675 11,162,292
413,617 10,079,224
Expenditures
General government:
Governing body:
Personnel services 48,549 48,205
Other services and charges 240,211 180,976
Reimbursement from enterprise
funds (118,289) (151, 040)
Capital outlay - -
178,951 170,471 8,480 78,141
Ruffin-Roulhac:
Other services and charges 53,551 95,627
Capital outlay -
Debt Service Payments 200,171 200,171
Reimbursement from enterprise
funds (158,148) (110,388)
180,145 95,574 84,571 185,410
Administration:
Personnel services 1,041,880 854,957
Other services and charges 456,965 471,122
Reimbursement from enterprise
funds (691,268) (756,289)
890,513 807,577 82,936 569,790
Finance:
Personnel services 420,707 472,654
Other services and charges 82,064 81,797
Debt service payments -
Reimbursement from enterprise
funds (236,069) (314,641)
319,090 266,702 52,388 239,810
70
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2020 with Comparative Actual Amounts for
Year Ended June 3o, 2019
Schedule 1
(5 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Planning:
Personnel services $ 386,393 $ 378,387
Other services and charges 141,094 44,410
823,546 527,487 296,059 422,797
Motor pool:
Personnel services 290,759 276,961
Other services and charges 122,417 149,084
Debt service payments 82,311 84,091
Reimbursement from enterprise
funds (141,277) (232, 819)
Total general government
413,244 354,210 59,034 277,317
2,805,489 2,222,021 583,468 1,773,265
Public safety:
Police department:
Personnel services 2,828,278 2,616,169
Other services and charges 309,797 332,202
Capital outlay 56,956 67,651
Debt service payments 127,206 145,395
3,488,163 3,322,237 165,926 3,161,417
Fire inspections/code enforcement:
Personnel services 151,411 130,636
Other services and charges 20,389 10,965
Debt service payments 100,402 226,455
337,693 272,202 65,491 368,056
Safety:
Personnel services 164,626 105,904
Other services and charges 502,636 432,080
Capital outlay -
Reimbursement from enterprise
funds (150,399) (476,329)
Fire protection
Other services and charges
638,823 516,863 121,960 61,655
1,122,806 1,081,207
1,128,238 1,122,806 5,432 1,081,207
Total public safety 5,592,917
5,234,108 358,809 4,672,335
71
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2020 with Comparative Actual Amounts for
Year Ended June 3o, 2019
Schedule 1
(5 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Transportation:
Street department/Powell Bill:
Personnel services $ 307,219 $ 277,642
Other services and charges 147,052 161,914
Capital outlay 230,040 476,541
Debt service payments 41,018 41,018
Total transportation
974,755 725,329 249,426 957,115
974,755 725,329 249,426 957,115
Environmental protection:
Sanitation department:
Personnel services 276,391 197,024
Other services and charges 145,965 139,684
Capital outlay 32,758
Debt service payments 76,323 120,391
Cemetery:
Other services and charges
Total environmental
protection
557,246 531,437
25,809 457,099
7,015 8,512
13,994 7,015
6,979 8,512
571,240 538,452 32,788 465,611
Economic and physical development:
Tourism:
Personnel Services 38,550 33,911
Other services and charges 434,944 452,229
Total economic and physical
development
Community activities and projects:
Contributions
Other services and charges
Debt service payments
550,870 473,494 77,376 486,140
550,870 473,494 77,376 486,140
250,962 158,906
98,791 100,899
Total community activities
and projects 405,699 349,753 55,946 259,805
72
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2020 with Comparative Actual Amounts for
Year Ended June 30, 2019
Schedule 1
(5 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Parks and recreation:
Personnel services $ 161,376 $ 148,258
Other services and charges 375,936 342,887
Debt service payments 241,141 246,363
Reimbursement from enterprise
funds (25,800) (25,800)
Capital Outlay 23,897
Total parks and recreation
Contingency:
Other services and charges
Total expenditures
830,753 752,653 78,100 735,605
11,731,723 10,295,810
1,435,913 9,349,876
Revenues over (under)
expenditures (983,048) 866,482 1,849,530 729,348
Other financing sources (uses):
Transfer to other funds:
General Capital Projects Fund (80,000) (80,000) (20,000)
Downtown Improvements Capital
Project Fund - (76,814)
Public Safety Facility Capital
Project Fund (312,000) (312,000) -
Riverwalk - CMAQ Fund (50,343) (50,343) - (43,420)
Public Works Project Fund - (79,182)
Transfer from other funds:
80
Capital Project Fund 55,368 55,368
Downtown Improvements Capital
Project Fund 36,487 36,487
Installment purchase obligations
issued
Sale of capital assets - - -
Total other financing sources
(uses)
(386,975) (350,488) 36,487 (219,416)
Appropriated fund balance 1,370,023 (1,370,023)
Net change in fund balance 515,994 $ 515,994 509,932
Fund balance, beginning 7,955,027 7,445,095
Fund balance, ending $ 8,471,021 $ 7,955,027
73
Town of Hillsborough, North Carolina
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2020
Schedule 2
(2 pages)
ASSETS
Cash and investments
Accounts receivable
Prepaid items
Due from other governments
Restricted assets:
Cash and investments
Total assets
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities
Due to other funds
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue
Total deferred inflows
of resources
Fund balances:
Nonspendable:
Prepaid Items
Restricted for:
Stabilization by state statute
Capital projects
Committed for:
Capital projects
Unassigned
Total fund balances (deficit)
Consolidated Downtown Riverwalk
General Improvements CMAQ
Capital Capital Capital
Projects Projects Project
Fund Fund Fund
$ - $
165,441
301,829 - -
$ 301,829 $ - $ 165,441
2,656
160,038
2,656 160,038
122,253 - 192,253
176,920 -
(186,850)
299,173 - 5,403
Total liabilities, deferred inflows of
resources, and fund balances $ 301,829 $ - $ 165,441
74
Schedule 2
(2 pages)
Town Barn Public Works Public Safety
Improvements Rail Station Building Building Total
Capital Capital Capital Capital Nonmajor
Project Project Project Project Governmental
Fund Fund Fund Fund Funds
$ 19,290 $ 128,200 $ 131,009 $ 278,499
- - - - 165,441
301,829
$ 19,290 $ 128,200 $ 131,009 $ 745,769
- - 12,049 14,705
160,038
- - - 12,049 174,743
1,656 - 75,353 391,515
- - - 176,920
17,634 128,200 43,607 189,441
- - - (186, 850)
19,290 128,200 118,960 571,026
$ $ 19,290 $ 128,200 $ 131,009 $ 745,769
75
Town of Hillsborough, North Carolina
Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
Nonmajor Governmental Funds
Year Ended June 30, 2020
Schedule 3
(2 pages)
Revenues
Restricted intergovernmental
revenues:
Federal grants
State grants
Contributions from property owners
Investment earnings
Consolidated Downtown Riverwalk
General Improvements CMAQ
Capital Capital Capital
Projects Project Project
Fund Fund Fund
11,147
1,207
Total revenues 12,354
Expenditures
Current:
General government
Economic and physical development
Parks and recreation
Total expenditures
97,102
235,794
$ 786,705
235,794 786,705
7,378
97,102 - 7,378
Revenues over (under)
expenditures (84,748) 235,794 779,327
Other financing sources
Transfer from General Fund
Transfer to General Fund
Transfer to Water & Sewer Fund
80,000
50,343
(36,487) -
Total other financing sources 80,000 (36,487) 50,343
Net change in fund balances (4,748) 199,307 829,670
Fund balances (deficit), beginning 303,921 (199,307) (824,267)
Fund balances (deficit), ending $ 299,173 $ - $ 5,403
76
Schedule 3
(2 pages)
Town Barn Public Works Public Safety
Improvements Rail Station Building Building Total
Capital Capital Capital Capital Nonmajor
Project Project Project Project Governmental
Fund Fund Fund Fund Funds
$
31
$ - $ $ - $ 786,705
- - - 235,794
- 11,147
- - 1,238
31 - - 1,034,884
- - - 193,040 290,142
- 16,395 - 16,395
- - - 7,378
- 16,395 - 193,040 313,915
31 (16,395) - (193,040) 720,969
- - 312,000 442,343
(55,368) - (91,855)
(10,822) - - - (10,822)
(66,190)
(66,159)
66,159
312,000 339,666
(16,395) - 118,960 1,060,635
35,685 128,200 - (489,609)
$ - $ 19,290 $ 128,200 $ 118,960 $ 571,026
77
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Town Barn Improvements Capital Project Fund
Year Ended June 30, 2020
Schedule 4
Revenues
Investment earnings
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
$ 9,233 $ 9,827 $ 31 $ 9,858 $ 625
Total revenues 9,233
9,827 31 9,858 625
Expenditures
Design 144,510 144,182 144,182
Construction 1,596,709 1,596,709 1,596,709
Miscellaneous capital items 334,307 334,307 334,307
Total expenditures
Revenues
under expenditures
2,075,526 2,075,198
328
2,075,198 328
(2,066,293) (2,065,371) 31 (2,065,340)
Other financing sources (uses)
Installment purchase
obligations issued 1,997,329 1,997,329
Transfer from General Fund 134,201 134,201
Transfer to General Fund (65,237) -
Transfer to Water & Sewer Fund
Total other financing
sources (uses)
(55,368)
(10,822)
1,997,329
134,201
(55,368)
(10,822)
953
9,869
(10,822)
2,066,293 2,131,530 (66,190) 2,065,340 (953)
Net change in fund
balance $ $ 66,159 (66,159) $ - $
Fund balance, beginning 66,159
Fund balance, ending $
78
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Capital Projects Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2020
Schedule 5
Revenues
Contributions from property
owners
Investment earnings
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects To Date (Negative)
$ 3,205,855 $ 11,147 $ (3,205,856) $ 11,146 $ 11,146
Total revenues - 3,205,855
11,147 (3,205,856)
11,146 11,146
Expenditures
Connectivity projects 40,000 5,956 5,956 34,044
Fiber loop 150,000 - - - 150,000
Construction 80,000 3,205,856 91,146 (3,205,856) 91,146 (11,146)
Total expenditures
Revenues under
expenditures
270,000 3,205,856
(270,000)
97,102 (3,205,856)
97,102 172,898
(1) (85,955) - (85,956) 184,044
Other financing sources
(uses):
Transfer from General Fund 277,070 197,071 72,930 270,001 (7,069)
Transfer to General Fund (7,070) (7,070) 7,070 7,070
Total other financing
sources 270,000 190,001 80,000 270,001 1
Net change in fund
balance
Fund balance, beginning
Fund balance, ending
$ $ 190,000 (5,955) $
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
Transfers out - Capital Reserve Fund
Fund balance, beginning (Capital Reserve Fund)
190,000
184,045
1,207
113,921
Fund balance, ending (Consolidated General
Capital Projects Fund) $ 299,173
$ 184,045 $ 184,045
79
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Capital Reserve Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2020
Schedule 6
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Capital contributions $ 1,105,000 $ 1,105,000 $ $ 1,105,000 $
Affordable Housing Revenue 91,000 - (91,000)
Collins Ridge- Restricted 295,440 - (295,440)
Interest on investments 15,065 20,975 1,207 22,182 7,117
Total revenues 1,506,505 1,125,975 1,207 1,127,182 (379,323)
Expenditures
Affordable Housing Expenditures 91,000 - (91,000)
Collins Ridge Public Safety 235,440 - (235,440)
Collins Ridge Garbage Truck 60,000 (60,000)
Waterstone Police 108,010 (108,010)
Total expenditures
494,450 - (494,450)
Revenues over
expenditures 1,012,055 1,125,975
Other financing uses
Transfer to General Fund (609,024) (609,023)
Transfer to Water Sewer
Capital Reserve Fund (403,031) (403,031)
Total other financing
uses
Net change in fund
balance
(1,012,055) (1,012,054)
1,207
1,127,182
(609,023)
(403,031)
115,127
1
(1,012,054) 1
$ $ 113,921 1,207 $ 115,128 $ 115,128
Fund balance, beginning 113,921
Fund balance, ending $ 115,128
80
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Downtown Improvements Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2020
Schedule 7
Project
Authorization
Revenues
Restricted intergovernmental
revenues
State grants $ 365,000
Federal grants 366,000
Total revenues
Expenditures
Design
Construction
Administration
731,000
3,173
900,285
111,093
Total expenditures 1,014,551
Revenues
under expenditures
Actual
Prior
Years
$ 365,000
120,946
Current
Year
Total
To Date
Variance
Positive
(Negative)
$ 235,794 $ 600,794 $ 235,794
120,946 (245,054)
485,946 235,794
3,173
860,431
105,200
968,804
(283,551) (482,858) 235,794
Other financing sources
Transfer from General Fund 283,551 283,551
Transfer to General Fund - (36,487)
Total other financing
sources/(uses) 283,551
Net change in fund
balance
721,740
3,173
860,431
105,200
968,804
(247,064)
283,551
(36,487)
283,551 (36,487) 247,064
$ - $ (199,307)
(9,260)
39,854
5,893
45,747
36,487
(36,487)
(36,487)
199,307 $ - $
Fund deficit, beginning (199,307)
Fund balance, ending $
81
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Riverwalk CMAQ Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 3o, 2020
Schedule 8
Revenues
Restricted intergovernmental
revenues:
Federal grants
Total revenues
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
$ 1,006,850 $ 144,867 $ 786,705 $ 931,572 $ (75,278)
1,006,850 144,867 786,705 931,572 (75,278)
Expenditures
Design 131,778 131,778 - 131,778 -
Construction 1,021,240 939,990 4,702 944,692 76,548
Administration 105,545 98,736 2,676 101,412 4,133
Total expenditures
Revenues
under expenditures
Other financing sources
Transfer from General Fund
1,258, 563 1,170, 504
7,378 1,177,882 80,681
(251,713) (1,025,637) 779,327 (246,310) 5,403
251,713 201,370
50,343 251,713
Net change in fund
balance $ $ (824,267) 829,670 $ 5,403 $ 5,403
Fund balance, beginning (824,267)
Fund balance, ending $ 5,403
82
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Rail Station Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 3o, 2020
Schedule 9
Revenues
Restricted intergovernmental
revenues:
State grants
Transit taxes (Article 43)
Total revenues
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
$ 870,000 $
116,000
$ - $ $ (870,000)
(116,000)
986,000 - - - (986,000)
Expenditures
Design 891,000 13,865 13,865 877,135
Legal 27,500 9,450 16,395 25,845 1,655
Miscellaneous 126,500 - 126,500
Total expenditures 1,045,000
Revenues
under expenditures
Other financing sources
Transfer from General Fund
Net change in fund
balance
23,315 16,395 39,710 1,005,290
(59,000) (23,315) (16,395) (39,710) 19,290
59,000 59,000 - 59,000
$ $ 35,685 (16,395) $ 19,290 $ 19,290
Fund balance, beginning 35,685
Fund balance, ending $ 19,290
83
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Public Works Building Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2020
Schedule 10
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design $ 75,000 $ 25,982 $
Construction 79,182
Total expenditures
Revenues
under expenditures
$ 25,982 $ 49,018
- 79,182
154,182 25,982 - 25,982 128,200
(154,182) (25,982)
Other financing sources
Transfer from General Fund 154,182
(25,982) 128,200
154,182 - 154,182
154,182 154,182 154,182
Net change in fund
balance $ $ 128,200 - $ 128,200 $ 128,200
Fund balance, beginning 128,200
Fund balance, ending $ 128,200
84
Schedule 11
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Public Safety Building Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2020
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Construction $ 222,855 $ $ 180,991 $ 180,991 $ 41,864
Miscellaneous 84,145 12,049 12,049 72,096
Contingency 5,000 - - 5,000
Total expenditures 312,000 193,040 193,040 118,960
Revenues
under expenditures (312,000) (193,040) (193,040) 118,960
Other financing sources
Transfer from General Fund
Restricted Revenue
Transfer from General Fund
135,440
176,560
135,440 135,440
176,560 176,560
Total other financing
sources/(uses) 312,000 312,000 312,000
Net change in fund
balance
Fund deficit, beginning
$
$ 118,960 $ 118,960 $ 118,960
Fund balance, ending $ 118,960
85
Town of Hillsborough, North Carolina
Schedule of Revenues
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2020 with Comparative Actual Amounts
for Year Ended June 30, 2019
Schedule 12
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Revenues
Operating revenues:
Water charges $ 4,780,000 $ 4,980,554 $ 200,554 $ 4,610,474
Sewer charges 4,760,000 4,974,432 214,432 4,773,747
System development fees 456,628 456,628
Other receipts 203,455 310,880 107,425 2,506,530
10,200,083 10,722,494 522,411 11, 890, 751
Nonoperating revenues:
Interest on investments 10,000 35,144 25,144 29,325
10,000 35,144 25,144 29,325
Total revenues $ 10,210,083 $ 10,757,638 $ 547,555 $ 11,920,076
86
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2020 with Comparative Actual Amounts
for Year Ended June 3o, 2019
Schedule 13
(3 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Expenditures
Engineering:
Personnel services $ 363,968 $ 298,807
Other services and charges 1,547,134 2,142,364
Capital outlay - 6,725
Total engineering $ 2,323,562 1,911,102 $ 412,460 2,447,896
Billing and collection:
Personnel services 305,356 258,624
Other services and charges 282,098 516,029
Repairs and maintenance -
Capital outlay 28,892
Debt service payments 39,125 39,125
Total billing and
collection 703,507 626,579 76,928 842,670
Water plant:
Personnel services 636,084 606,122
Other services and charges 366,440 298,150
Repairs and maintenance 58,209 67,650
Capital outlay 41,413 -
Debt service payments 104,378 106,715
Total water plant 1,395,048 1,206,524 188,524 1,078,637
Water distribution:
Personnel services 495,595 471,883
Other services and charges 223,125 243,742
Repairs and maintenance 32,617 49,064
Capital outlay 11,647 83,465
Debt service payments 115,604 94,036
Total water distribution 1,202,890 878,588 324,302 942,190
Wastewater collection:
Personnel services 485,206 462,248
Other services and charges 280,395 295,777
Repairs and maintenance 147,293 39,661
Capital outlay 198,983 94,490
Debt service payments 71,966 73,558
Total wastewater
collection 1,437,143 1,183,843 253,300 965,734
87
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2020 with Comparative Actual Amounts
for Year Ended June 3o, 2019
Schedule 13
(3 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Wastewater plant:
Personnel services 494,701 476,767
Other services and charges 245,657 313,611
Repairs and maintenance 159,923 207,344
Capital outlay 86,200 18,766
Debt service payments 1,218,427 1,240,289
Total wastewater plant 2,417,521 2,204,908 212,613 2,256,777
Reservoir:
Other services and charges 21,412 21,622
Repairs and maintenance 6,440 10,000
Debt service payments 449,908 384,150
Total reservoir 606,239 477,760 128,479 415,772
Total expenditures
Revenues over (under)
expenditures
10,085,910 8,489,304 1,596,606 8,949,676
124,173 2,268,334
2,144,161 2,970,400
Other financing sources (uses)
Transfer to Water and Sewer
Capital Reserve Fund - (2,176,594)
Transfer to Water and Sewer
Capital Projects Fund (119,695) (119,695) (810,000)
Transfer to Water System
Development Reserve Fund (263,129) (263,129)
Transfer to Sewer System
Development Reserve Fund (193,499) (193,499)
Transfer from Water and
Sewer Capital Projects Fund 349,643 349,643 -
Transfer from Water and
Sewer Capital Reserve Fund 97,492 97,492 466,470
Transfer from North
Campus Project 10,822 10,822
Insurance proceeds - - 37,279
Contingency (226,458) 226,458
Total other financing
sources (uses) (344,824) (118,366) 226,458 (2,482,845)
Excess of revenues and
other financing sources
(uses) over (under)
expenditures and other
uses (220,651) 2,149,968 2,370,619 487,555
Appropriated fund balance 220,651 - (220,651)
88
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 3o, 2020 with Comparative Actual Amounts
for Year Ended June 3o, 2019
Schedule 13
(3 pages)
2020 2019
Variance
Positive
Budget Actual (Negative)
Actual
Excess of revenues and
other uses over
expenditures and other
uses $ - $ 2,149,968 $ 2,149,968 $ 487,555
Reconciliation of budgetary basis (modified accrual) to full accrual basis
Excess of revenues and other sources over expenditures and other uses $ 2,149,968
Reconciling items:
Interest income from Water and Sewer Capital Projects Fund 40,317
Interest income from Water and Sewer Capital Reserve Fund 37,481
Interest income from WFER Carrstore Rd Capital Project Fund 6,120
Payment of principal on notes, bonds and installment purchases 1,189,949
Increase in deferred outflows of resources - pensions (73,707)
Decrease in net pension liability (78,628)
Decrease in deferred inflows of resources - pensions (4,538)
Increase in deferred outflows of resources - OPEB 7,996
Decrease in total OPEB liability 136,992
Increase in deferred inflows of resources - OPEB (118,234)
Capital outlay 338,241
Depreciation (1,695,988)
Loss on disposal of capital assets (83,384)
Insurance Proceeds
Interest expense accrual adjustment (15,314)
Vacation pay accrual adjustment (4,838)
Amortization of premium on bonds payable 56,690
Contributed capital 539,500
Transfer to General Fund (208,674)
Transfer to Water and Sewer Capital Projects 576,323
Transfer from Water and Sewer Capital Projects (447,135)
Change in net position $ 2,349,137
89
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
Water and Sewer Capital Projects Fund
Enterprise Fund
Year Ended June 3o, 2020
Schedule 14
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects to Date (Negative)
Revenues
Interest on investments $ 210,731 $ 172,888 $ 40,317 $ $ 213,205 $ 2,474
Other receipts - 12,160 (12,160) - - -
Total revenues 210,731 185,048 28,157 213,205 2,474
Expenditures
Capital improvements:
EDD water line extension 250,000 27,437 - 27,437 222,563
Churton St Main Replacement 430,000 - 430,000
Orange Gr/Churton sewer proj 40,000 295 26,300 26,595 13,405
16" Water connection
under 1-40 100,000 27,367 19,783 47,150 52,850
Booster pump station 182,388 11,666 19,910 31,576 150,812
Waterstone water tank - - -
Water meter replacement -
Automatic meter reading
project - - -
Effluent aeration - -
Churton Street Sewer 500,000 58,583 219,911 - 278,494 221,506
River pump station 33,800 6,760 - 6,760 27,040
Wastewater system rehab 85,895 - 25,385 25,385 60,510
Other improvements - - - - -
1,622,083 97,911 345,486 - 443,397 1,178,686
West Fork Eno Reservoir:
Design 1,811,063 1,792,764 (121,412) 1,671,352 139,711
Construction 9,577,874 7,642,595 1,341,994 - 8,984,589 593,285
Land acquisition 42,304 42,304 - 42,304 -
11,431,241 9,477,663 1,220,582 - 10,698,245 732,996
Total expenditures 13,053,324
Revenues over (under)
expenditures (12,842,593) (9,390,526) (1,537,911) - (10,928,437) 1,914,156
9,575,574 1,566,068
11,141,642 1,911,682
Other financing sources (uses)
Proceeds from installment
purchases 10,155,000 10,155,000 - 10,155,000
Premium on bonds issuance 1,025,846 1,025,846 - 1,025,846
Transfer from Water and Sewer
Capital Reserve Fund -
Transfer from Water and
Sewer Fund 3,870,200 4,140,021 (135,873) 3,870,200
Transfer to Water and Sewer
Fund (2,208,453) (2,262,758) (79,643) (2,208,453)
Total other financing
sources (uses) 12,842,593
Excess of revenues and
other sources over
expenditures and other
financing uses
13,058,109 (215,516)
12,842,593 -
$ 3,667,583 $ (1,753,427) $ - $ 1,914,156 $ 1,914,156
90
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
Water and Sewer Capital Reserve Fund
Enterprise Fund
Year Ended June 3o, 2020
Schedule 15
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments $ 300,868 $ 350,659 $ 37,481 $ 388,140 $ 87,272
Expenditures
Capital improvements- water 794,415 794,415
Capital improvements- sewer 1,949,845 - 1,949,845
Capital improvements- water tower 3,761 - 3,761
Revenues over (under)
expenditures
2,748,021 - - 2,748,021
(2,447,153) 350,659 37,481 388,140 2,835,293
Other financing sources (uses)
Transfers from Water and
Sewer Fund 12,261,329 12,261,329 - 12,261,329
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 (7,863,219) (7,765,727) (97,492) (7,863,219)
Transfers to Water and Sewer
Capital Projects Fund (1,299,553) (1,299,553) (1,299,553)
Transfers to Water System
Development Reserve Fund (1,106,017) (1,106,017) (1,106,017)
Transfers to Sewer System
Development Reserve Fund (1,014,608) - (1,014,608) (1,014,608)
Total other financing
sources (uses) 2,447,153 4,665,270 (2,218,117) 2,447,153
Excess of revenues and
other sources over
(under) expenditures $ $ 5,015,929 $ (2,180,636) $ 2,835,293 $ 2,835,293
91
Schedule 16
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
Water System Development Reserve Fund
Enterprise Fund
Year Ended June 3o, 2020
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments $ - $ $ $ $
Expenditures
Capital improvements- water -
Revenues over (under)
expenditures
Other financing sources (uses)
Transfers from Water and
Sewer Capital Project Fund
Transfers from Water and
Sewer Fund
Transfers to Utility Capital
Project Fund for:
Edd Wtr Line
16" Wtr Conn
US 70 Design
US 70 Phase 1
Total other financing
sources (uses)
Excess of revenues and
other sources over
(under) expenditures
1,106,017
263,129
(259,404)
(465, 000)
(345,000)
(299,742)
$
1,106,017 1,106,017
263,129 263,129
1,369,146
259,404
465,000
345,000
299,742
1,369,146 1,369,146
$ $ 1,369,146 $ 1,369,146 $ 1,369,146
92
Schedule 17
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
Sewer System Development Reserve Fund
Enterprise Fund
Year Ended June 3o, 2020
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments $ $ $ $ - $
Expenditures
Capital improvements- water
Revenues over (under)
expenditures
Other financing sources (uses)
Transfers from Water and
Sewer Capital Project Fund
Transfers from Water and
Sewer Fund
Transfers to Utility Capital
Project Fund for:
River Pum
Coll Sys
Total other financing
sources (uses)
Excess of revenues and
other sources over
(under) expenditures
1,014,608 1,014,608 1,014,608
193,499 193,499 193,499
(200,000)
(1,008,107)
1,208,107
200,000
1,008,107
1,208,107 1,208,107
$ $ 1,208,107 $ 1,208,107 $ 1,208,107
93
Schedule i8
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
WFER Carrstore Mill Creek Road Capital Project Fund
Enterprise Fund
Year Ended June 30, 2020
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments
$ 6,796 $ $ 6,120 $ 6,120 $ (676)
Expenditures
Design 150,000 - 120,690 120,690 29,310
Land Aquisition 5,500 - 5,202 5,202 298
Construction Administration 310,000 49,292 49,292 260,708
Construction 2,440,791 - 2,440,791
Miscellaneous 371,505 106,425 106,425 265,080
3,277,796 - 281,609 281,609 2,996,187
Revenues over (under)
expenditures (3,271,000) (275,489) (275,489) 2,995,511
Other financing sources (uses)
Proceeds from installment
purchases 3,271,000 - 3,271,000 3,271,000
Total other financing
sources (uses) 3,271,000 3,271,000 3,271,000
Excess of revenues and
other sources over
(under) expenditures $ - $ $ 2,995,511 $ 2,995,511 $ 2,995,511
94
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP)
Stormwater Fund
Enterprise Fund
Year Ended June 30, 2020
Schedule 19
Variance
Favorable
Budget Actual (Unfavorable)
Revenues
Operating revenues:
Stormwater charges $ 652,000 $ 666,355 $ 14,355
Other operating revenues 17,757 4,522 (13,235)
Total revenues 669,757
670,877 1,120
Expenditures
Operating expenditures:
Personnel services 265,927
Other services and charges 167,175
Repairs and maintenance 24,593
Capital outlay 33,813
Total expenditures 669,757
Revenues over
expenditures
$
491,508 178,249
179,369 $ 179,369
Reconciliation of modified accrual
basis to full accrual basis:
Capital outlay 33,813
Depreciation expense (56,645)
Gain on disposal of fixed assets 0
Increase in accrued vacation pay (75)
Increase in net pension liability (7,826)
Increase in total OPEB liability 13,634
Increase in deferred outflows of
resources - pensions (7,336)
Increase in deferred outflows of
resources - OPEB 789
Decrease in deferred inflows of
resources - pensions (452)
Increase in deferred inflows of
resources - OPEB (11,766)
Transfer from General Fund
Change in net position
$ 143,505
95
Town of Hillsborough, North Carolina
Schedule of Changes in Assets and Liabilities
Special Assessment Debt Agency Fund
Fiduciary Fund
Year Ended June 30, 2020
Schedule 20
ASSETS
Beginning Ending
Balance Additions Deductions Balance
$ - 601,503 $ 601,503 $ -
LIABILITIES $ $ 601,503 601,503 $
96
Additional Financial Data
This section contains additional information on property taxes.
• Schedule of Ad Valorem Taxes Receivable
• Analysis of Current Tax Levy
97
Town of Hillsborough, North Carolina
Schedule of Ad Valorem Taxes Receivable
June 30, 2020
Schedule 21
Fiscal Year
Uncollected
Balance
July 1, 2019
Additions
Uncollected
Collections Balance
and Credits June 30, 2020
2019-2020 $ - $ 7,435,586 $ 7,374,271 $ 61,315
2018-2019 53,058 17,940 35,118
2017-2018 37,072 7,627 29,445
2016-2017 18,189 - 3,293 14,896
2015-2016 14,785 5,301 9,484
2014-2015 11,344 3,445 7,899
2013-2014 14,129 3,109 11,020
2012-2013 14,056 1,974 12,082
2011-2012 8,263 - 574 7,689
2010-2011 10,497 2,092 8,405
2009-2010 6,017 - 6,017
$ 187,410 $ 7,435,586 $ 7,425,643
Less allowance for
uncollectible
accounts:
General Fund
197,353
(43,668)
$ 153,685
Reconciliation of collections and credits with revenues:
Ad valorem taxes - General Fund $ 7,422,863
Amount written off for tax year 2009-2010 6,017
Penalties and interest (19,874)
Adjustments and refunds* 16,637
$ 7,425,643
98
Town of Hillsborough, North Carolina
Analysis of Current Tax Levy
Year Ended June 30, 2020
Schedule 22
Original levy:
Property taxed at
current year's rate
Motor vehicle license
fees, tax and tag
Total property
valuation
Town -Wide
Property
Valuation**
Rate
Total Levy
Property
Excluding
Registered Registered
Total Motor Motor
Levy* Vehicles Vehicles
$ 1,087,435,545 0.6200 $ 6,740,252 $ 6,740,252 $
79,373,505
$ 1,166,809,050
695,334 - 695,334
7,435,586 6,740,252 695,334
Releases and abatements
Net levy 7,435,586 6,740,252 695,334
Uncollected taxes at
June 30, 2020 61,315 61,315
Current year's
taxes collected $ 7,374,271 $ 6,678,937 $ 695,334
Current levy
collection
percentage 99.18% 99.09% 100.00%
* Total adjusted levy includes discoveries and abatements.
** Property tax valuation prior to the discoveries and abatements.
99
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.
Page
Financial Trends Information
These schedules contain trend information to help the reader understand how the Town's
financial performance and well-being have changed over time.
Revenue Capacity Information
These schedules contain information to help the reader assess the Town's most significant local
revenue sources, property taxes, and water and sewer charges.
Debt Capacity Information
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.
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the
environment within which the Town's financial activities take place.
Operating Information
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.
103
115
127
134
139
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.
100
Financial Trends Information
101
Town of Hillsborough, North Carolina
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
2011 2012 2013 2014
Governmental activities:
Net investment in capital
assets $ 5,338,508 $ 5,870,981 $ 6,723,808 $ 10,924,631
Restricted 2,121, 546 1,570,832 1,831,742 1,700,808
Unrestricted 3,766,961 3,984,264 4,390,314 4,433,988
Total governmental
activities net position $ 11,227,015 $ 11,426,077 $ 12,945,864 $ 17,059,427
Business -type activities
Net investment in capital
assets $ 24,316,110 $ 26,632,441 $ 26,017,050 $ 27,110,293
Restricted 1,721,067 1,974,677 2,590,989 2,591,211
Unrestricted 3,518,417 2,674,119 4,084,460 6,546,829
Total business -type
activities net position $ 29,555,594 $ 31,281,237 $ 32,692,499 $ 36,248,333
Primary government
Net investment in capital
assets $ 29,654,618 $ 32,503,422 $ 32,740,858 $ 38,034,924
Restricted 3,842,613 3,545,509 4,422,731 4,292,019
Unrestricted 7,285,378 6,658,383 8,474,774 10,980,817
Total primary government
net position $ 40,782,609 $ 42,707,314 $ 45,638,363 $ 53,307,760
102
Table 1
2015 2016 2017 2018 2019 2020
$ 11,870,401 $ 14,242,464 $ 15,186,419 $ 18,580,077 $ 20,511,801 $ 19,779,745
1,558,393 1,753,856 2,518,696 3,089,866 3,757,005 1,851,081
4,797,140 4,030,053 2,977,656 1,466,288 1,312,978 4,589,320
$ 18,225,934 $ 20,026,373 $ 20,682,771 $ 23,136,231 $ 25,581,784 $ 26,220,146
$ 30,507,881 $ 32,483,743 $ 34,669,712 $ 36,693,299 $ 38,536,890 $ 38,149,486
2,591,600 2,596,324 2,605,482 2,631,171 2,677,877 5,857,366
6,190,061 8,522,788 9,096,374 8,308,697 11,444,287 11,144,844
$ 39,289,542 $ 43,602,855 $ 46,371,568 $ 47,633,167 $ 52,659,054 $ 55,151,696
$ 42,378,282 $ 46,726,207 $ 49,856,131 $ 55,273,376 $ 59,048,691 $ 57,929,231
4,149,993 4,350,180 5,124,178 5,721,037 6,434,882 7,708,447
10,987,201 12,552,841 12,074,030 9,774,985 12,757,265 15,734,164
$ 57,515,476 $ 63,629,228 $ 67,054,339 $ 70,769,398 $ 78,240,838 $ 81,371,842
103
Town of Hillsborough, North Carolina
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
Expenses
Governmental activities:
General government
Public safety
Transportation
Environmental protection
Economic and physical
development
Community activities and
projects
Parks and recreation
Unallocated interest
expense
Total governmental
activities expenses
Business -type activities:
Water and sewer
Stormwater
Total business -type
activities expenses
Total primary government
expenses
Program Revenues
Governmental activities:
Charges for services:
General government
Public safety
Transportation
Economic and physical
development
Parks and recreation
Operating grants and
contributions
Capital grants and
contributions
2011
$ 1,353,757
3,379,456
486,940
595,447
256,092
49,505
36,844
108,598
6,266,639
5,758,760
5,758,760
2012
$ 1,402,445
2,597,911
1,510,493
546,612
2013
$ 1,301,963
3,395,465
497,540
580,312
243,163 485,977
40,996 64,878
51,500 36,267
104,518 105,022
6,497,638 6,467,424
6,151,253 6,279,271
6,151,253 6,279,271
2014
$ 1,524,025
3,619,529
500,491
833,623
367,389
119,251
55,849
126,250
7,146,407
6,271,311
6,271,311
$ 12,025,399 $ 12,648,891 $ 12,746,695 $ 13,417,718
$ 149,790 $
10,273
2,170
183,874
1,191,157
Total governmental
activities program revenues 1,537,264
160,990 $
15,593
2,970
228,457
203,301
611,311
326,565 $ 126,909
11,426 13,893
3,190
175,347
334,525
4,140
316,576
3,741,958
851,053 4,203,476
104
Table 2
(4 pages)
2015
$ 1,416,316
3,929,568
130,485
963,296
387,801
220,890
74,137
101,260
7,223,753
7,383,564
7,383,564
2016
$ 2,010,349
3,982,055
615,849
708,367
402,800
93,236
97,891
121,783
8,032,330
7,574,032
7,574,032
2017
$ 1,860,970
4,289,900
666,523
590,798
466,791
57,673
398,802
95,571
8,427,028
8,120,546
302,983
8,423,529
2018
1,865,408
4,666,798
684,226
478,122
498,150
42,038
429,664
114,957
8,779,363
8,949,652
458,118
9,407,770
2019 2020
1,865,007
4,705,989
718,593
468,057
488,592
34,311
493,868
140,004
2,391,829
5,559,342
1,024,817
558,337
557,378
166,373
511,512
121,076
8,914,421 10,890,664
9,355,337
566,231
8,807,373
527,372
9,921,568 9,334,745
$ 14,607,317 $ 15,606,362 $ 16,850,557 $ 18,187,133 $ 18,835,989 $ 20,225,409
$ 182,109
12,068
187,682
5,155
10,610
253,460
$ 122,233
13,645
184,863
41,000
4,720
28,052
1,393,799
$ 214,056
13,555
185,922
$ 208,837
19,938
245
5,000 360,440
5,130 5,940
26,690 197,119
570,035 1,634,422
158,451 296,255
16,016 17,667
730
29,000
6,537 2,890
221,637 267,790
3,379,916 236,211
651,084 1,788,312 1,020,388 2,426,941 3,812,287 820,813
105
Town of Hillsborough, North Carolina
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
Business -type activities:
Charges for services:
Water and sewer
Stormwater
Capital grants and
contributions
Total business -type
activities program revenues
Total primary government
program revenues
Net (Expense) Revenue
Governmental activities
Business -type activities
Total primary government
net expense
General Revenues and Other
Changes in Net Position
Governmental activities:
Taxes
Unrestricted inter-governemental
revenues
Investment earnings, unrestricted
Miscellaneous
Transfers
Total governmental
activities
Business -type activities:
Investment earnings
Miscellaneous
Transfers
Total business -type
activities
2011
2012
2013
2014
$ 6,755,260 $ 7,366,996 $ 7,686,356 $ 9,025,607
658,828
7,414,088
100,000
7,466,996
1,028,171
7,686,356 10,053,778
$ 8,951,352 $ 8,078,307 $ 8,537,409 $ 14,257,254
$ (4,729,375) $ (5,886,327) $ (5,616,371) $ (2,942,931)
1,655,328 1,315,743 1,407,085 3,782,467
$ (3,074,047) $ (4,570,584) $ (4,209,286) $ 839,536
$ 5,808,387 $ 5,816,041 $ 6,371,494 $ 6,603,311
635,907
10,838
24,141
6,479,273
14,568
14,568
Total primary government $ 6,493,841
Change in Net Position
Governmental activities
Business -type activities
$ 1,749,898
1,669,896
651,381
4,748
16,250
734,401
3,874
26,389
6,488,420 7,136,158
6,869
6,869
4,177
4,177
809,190
2,209
39,899
7,454,609
2,601
2,601
6,495,289 $ 7,140,335 $ 7,457,210
$ 199,062
1,725,643
$ 1,519,787 $ 4,511,678
1,411,262 3,785,068
Total primary government $ 3,419,794 $ 1,924,705 $ 2,931,049 $ 8,296,746
106
Table 2
(4 pages)
2015 2016
2017
2018
2019
$ 8,939,712 $ 10,713,397 $ 9,214,401 $ 10,249,270 11,890,751
- - 632,738 638,441 659,071
1,484,316 1,161,830 1,325,206 363,598 32,361
10,424,028
11,875,227 11,172,345
11,251,309 12,582,183
2020
10,265,866
670,877
996,128
11,932,871
$ 11,075,112 $ 13,663,539 $ 12,192,733 $ 13,678,250 $ 16,394,470 $ 12,753,684
$ (6,572,669) $ (6,244,018) $ (7,406,640) $ (6,352,422) (5,102,134)
3,040,464 4,301,195 2,748,816 1,843,539
2,660,615
(10,069,851)
2,598,126
$ (3,532,205) $ (1,942,823) $ (4,657,824) $ (4,508,883) $ (2,441,519) $ (7,471,725)
$ 6,698,408 $ 6,949,754 $ 7,426,516 $ 8,187,327 $ 8,238,074
998,629
1,177
40,962
7,739,176
745
745
1,034,811
16,771
43,121
8,044,457
12,118
12,118
1,010,393
37,562
58,811
8,533,282
19,897
19,897
1,080,184
120,273
88,047
9,475,831
44,935
(246,949)
1,135,259
261,029
(12,933)
(2,073,742)
7,547,687
243,186
48,344
2,073,742
(202,014) 2,365,272
$ 9,152,324
1,055,076
171,563
131,951
197,852
10,708,766
119,062
(26,694)
(197,852)
(105,484)
$ 7,739,921 $ 8,056,575 $ 8,553,179 $ 9,273,817 $ 9,912,959 $ 10,603,282
$ 1,166, 507
3,041,209
$ 1,800,439 $ 1,126,642
4,313,313 2,768,713
$ 3,123,409 $ 2,445,553
1,641,525 5,025,887
$ 638,915
2,492,642
$ 4,207,716 $ 6,113,752 $ 3,895,355 $ 4,764,934 $ 7,471,440 $ 3,131,557
107
Town of Hillsborough, North Carolina
Fund Balances
Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
2011 2012 2013 2014
General fund:
Reserved $ - $ $ $
Unreserved - - - -
Nonspendable 477 68,649 4,253 72,156
Restricted 1,047,758 955,064 1,115,688 1,110,734
Committed -
Assigned 215,354 88,094 330,206 782,995
Unassigned 3,478,868 3,803,076 4,151,725 4,151,581
4,742,457 4,914,883
5,601,872 6,117,466
All other governmental funds:
Reserved - -
Unreserved - - - -
Nonspendable - 52
Restricted 1,073,788 227,052 716,054 844,464
Committed 204,943 856,356 - 106,105
Assigned 131,490 7,070
Unassigned (324,964) (112,038) (20,444)
953,767 971,370 827,152 957,639
Total fund balance $ 5,696,224 $ 5,886,253 $ 6,429,024 $ 7,075,105
108
Table 3
2015 2016 2017 2018 2019 2020
68,242
1,049,112
1,294,457
3,805,372
6,217,183
509,281
272,548
781,829
175,392
1,385,320
672,896
3,698,078
219,730
1,452,915
787,525
4,049,462
5,931,686 6,509,632
368,536
171,698
1,065,781
159,314
1,848
2,367,086 3,451,333 1,282,646
985,729 724,066 749,550
4,090,432 3,779,628 6,438,825
7,445,095
7,955,027 8,471,021
722,780 305,672
385,520 228,293
(808,382) (242,109)
540,234 416,713
(1,023,574)
568,435
189,441
(186,850)
866,191 (489,609) 571,026
$ 6,999,012 $ 6,471,920 $ 6,926,345 $ 8,311,286 $ 7,465,418 $ 9,042,047
109
Town of Hillsborough, North Carolina
Changes in Fund Balance
Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
Revenues
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental
Restricted intergovernmental
Investment earnings
Contribution from property owners
Capital contributions
Use and rental
Other general revenues
Total revenues
Expenditures
Current:
General government
Public safety
Transportation
Environmental protection
Economic and physical
development
Community activities and
projects
Parks and recreation
Debt service:
Principal retirement
Interest and fiscal charges
Total expenditures
Excess of revenues over (under)
expenditures
Other financing sources (uses)
Transfers in
Transfers out
Insurance recovery
Debt service - principal on
refunding
Sale of capital assets
Proceeds from installment notes
Total other financing sources
Net change in fund balances
Capital outlay included in
functional expenditures above
Debt service as a percentage of
noncapital expenditures
2011
$ 4,610,003
1,163,501
635,907
1,234,870
10,838
200,000
160,063
67,071
8,082,253
2012
$ 4,716,460
1,124,696
651,381
453,755
4,748
100,000
176,583
69,669
7,297,292
2013
$ 5,135,469
1,229,425
734,401
308,007
3,874
337,991
34,079
7,783,246
2014
$ 5,429,114
1,199,185
809,190
768,716
2,209
1,445,207
140,802
48,337
9,842,760
1,232,665 1,235,107 1,122,514 2,799,302
3,347,597 3,164,361 3,134,327 3,455,438
1,718,386 1,693,664 1,011,557 851,502
583,919 476,415 471,880 806,262
256,092 243,163 485,977 367,389
54,946 325,666 64,878 119,251
791,184 239,105 430,831 1,675,156
303,074 283,126 407,246 474,458
107,928 98,896 111,265 118,711
8,395,791 7,759,503 7,240,475 10,667,469
(313,538) (462,211) 542,771
717,582
(717,582)
107,000
107,000
440,409
(843,440)
16,250
1,039,021
652,240
$ (206,538) $ 190,029
$ 2,280,672 $ 1,501,851
6.72%
6.10%
369,627
(369,627)
(824,709)
169,054
(169,054)
(1,256,353)
2,727,143
1,470,790
$ 542,771 $ 646,081
$ 997,107 $ 2,246,332
8.30% 7.04%
110
Table 4
2015
$ 5,437,266
1,263,425
998,629
642,732
1,177
1,325,271
194,177
56,727
9,919,404
2016
$ 5,669,002
1,280,114
1,034,811
262,144
16,771
381,406
176,878
118,323
8,939,449
2017
$ 6,064,137
1,381,990
1,010,393
374,938
37,562
18,955
2018
$ 6,701,848
1,502,359
1,080,184
726,194
120,273
22,434
232,611 583,186
79,734 53,804
9,200,320
2019 2020
$ 6,491,857
1,728,857
1,135,259
271,509
261,029
12,582
199,411
50,176
10,790,282 10,150,680
2,779,807 2,207,284 1,627,479 3,026,060 2,042,811
3,845,174 4,317,978 4,084,416 4,811,024 4,300,485
1,194,204 878,233 865,285 1,014,932 916,097
1,008,615 564,148 454,355 516,910 345,220
388,611 397,828 676,147 1,104,113 596,145
836,258 821,677 57,673 42,038 158,906
423,813 147,350 428,452 478,585 1,472,101
632,155 1,037,623 790,345 1,296,056 1,033,807
101,228 120,355 100,353 105,063 130,976
11,209,865 10,492,476 9,084,505 12,394,781 10,996,548
(1,290,461) (1,553,027) 115,815 (1,604,499)
160,482
(160,482)
1,214,368
1,214,368
465,037
(465,037)
1,025,935
1,025,935
394,991
(394,991)
344,808
(344,808)
21,610 43,670
317,000 2,945,770
338,610 2,989,440
$ (76,093) $ (527,092) $
(845,868)
219,416
(219,416)
$ 7,422,863
1,738,597
1,081,038
1,339,711
171,563
11,147
344,892
87,365
12,197,176
2,229,681
5,006,500
684,311
462,129
489,889
250,962
518,890
846,287
121,076
10,609,725
1,587,451
442,343
(453,165)
(10,822)
454,425 $ 1,384,941 $ (845,868) $ 1,576,629
$ 2,619,910 $ 1,962,820 $
8.54%
13.58%
893,524 $ 3,336,241 $ 2,202,180 $ 1,079,609
10.87% 15.47% 13.24% 10.15%
111
Revenue Capacity Information
112
Town of Hillsborough, North Carolina
Program Revenues by Function/Program
Last Ten Fiscal Years
(accrual basis of accounting)
2011 2012 2013 2014
Function/program
Governmental activities:
General government $ 382,843 $ 354,227 $ 361,590 $ 1,388,937
Public Safety 10,273 15,593 11,426 13,893
Transportation 848,978 228,521 185,847 312,282
Environmental
protection - - - 2,059,224
Economic and
physical development - - -
Community activities and
projects - - -
Parks and recreation 295,170 12,970 292,190 429,140
Subtotal governmental
activities
1,537,264 611,311
851,053 4,203,476
Business -type activities:
Water and sewer 7,414,088 7,466,996 7,686,356 10,053,778
Stormwater - - -
Subtotal business -type
activities
7,414,088 7,466,996 7,686,356 10,053,778
Total primary government $ 8,951,352 $ 8,078,307 $ 8,537,409 $ 14,257,254
113
Table 5
2015 2016 2017 2018 2019 2020
$ 192,719 $ 1,430,962 $ 230,872 $ 258,394 $ 2,767,963 $ 307,150
12,068 13,645 13,555 125,557 21,804 38,167
187,682 264,863 396,200 414,083 200,695 202,395
653 4,680 9,874 -
- 41,000 340,134 855,135 29,000 34,000
257,962
33,162 29,753 773,772 792,825
239,101
651,084 1,788,312 1,020,388 2,426,941 3,812,287 820,813
10,424,028 11,875,227 10,539,607 10,612,868 11,890,751 11,261,994
- 632,738 638,441 691,432 670,877
10,424,028
11,875,227 11,172,345 11,251,309 12,582,183 11,932,871
$ 11,075,112 $ 13,663,539 $ 12,192,733 $ 13,678,250 $ 16,394,470 $ 12,753,684
114
Town of Hillsborough, North Carolina
Tax Revenues by Source
Governmental Funds a
Last Ten Fiscal Years
(modified accrual basis of accounting)
Table 6
Fiscal
Year
Ad Valorem
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
2018 6,701,848
2019 6,491,857
2020 7,422,863
Change b
2011-2020 61.02%
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 61.02 percent in the past ten years. This is primarily due to property
values being re-evaluated every eight years. During the last ten years, there was one re-evaluation period in
2017. The revaluation periods along with increasing property values and steady growth has caused a
significant increase in Ad Valorem Revenue from 2011 to 2020.
115
Town of Hillsborough, North Carolina
Assessed Value and Actual Value of Taxable Property
Last Ten Fiscal Years
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
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%
2018 862,808,952 174,898,060 14,779,117 1,052,486,129 0.6200 100.00%
2019 868,656,886 212,280,396 7,918,389 1,088,855,671 0.6200 100.00%
2020 945,829,125 204,682,406 16,297,519 1,166,809,050 0.6200 100.00%
Source: Annual County Report of Valuation and Property Tax Levies.
* Real property values exclude tax-exempt property.
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.
116
Town of Hillsborough, North Carolina
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(rate per $100 of assessed value)
Table 8
Municipality Rates Overlapping Rates a
Fiscal Basic Total Fire
Year Rate Direct District b
County
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
2018 0.620 0.620 - 0.8380
2019 0.620 0.620 0.8504
2020 0.620 0.620 0.8679
Source: Orange County
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.
b The Fire District Tax applies to properties outside of the city limits.
117
Town of Hillsbo rough, North Ca rolina
Pr operty Tax Revenue and C olle ctions
Last Ten Fiscal Y ears
T abl e 9
Fiscal Collected within the
Year Taxes Le vi ed Fiscal Year of the Le vy Collections T otal C ollecti ons to Date
Ended for the Percentage in Subsequent Percentage
June 30, Fiscal Year Amount of Le vy Years Amount of Le vy
2011 4,690,863 4,557,501 97.16% 124,957 4,682,458 99.82%
2012 4,755,200 4,641,541 97 .61% 105,970 4,747,511 99.84%
2013 5,225,057 5,085,225 98 .82% 127,750 5,212,975 99.77%
2014 5,418,579 5,315,921 98.11% 91,638 5,407,559 99 .80%
2015 5,413,151 5,343,909 98 .72% 61,343 5,405,252 99 .85%
2016 5,646,239 5,583,929 98 .90% 52,826 5,636,755 99 .83%
2017 6,044,907 5,995,089 99.18% 34,922 6,030,011 99 .75%
2018 6,676,687 6,618,458 99 .13% 28,784 6,647,242 99 .56 %
2019 6,952,134 6,899,076 99 .24% 17,941 6,917,017 99.49%
2020 7,435,586 7,374,271 99.18% 7,374,271 99.18%
Sou rces: Orange Co un ty Board of Equalization and Assessment, and Orange County Department of Finance .
118
Town of Hillsbo rough, North Carolina
Principal Prope rty Taxpay ers
Curr ent Year and Nine Yea rs Ago
Tabl e 10
Taxpayer
2020 2011
Taxable
Assessed
Value
Rank
Percentage
of Total City
Taxable Ta xable
Assessed Assessed
Value Value
Rank
Percentage
of Total City
Taxable
Assessed
Value
CATES CREEK APARTMENTS LLC $ 25,189,600 1 2.86 %
LHNH PP APTS LLC (FORMERLY PATRIOTS $ 21,340,000 2 2.42%
LENNAR CAROLINAS LLC $ 12,827,406 3 1.46%
ALCURT HILLSBOROUGH LLC $ 11,269,600 4 1.28%
DANIEL BOONE LANDCO LLC $ 10,537,700 5 1.20% 8,833,496 5 1 .18%
WALMART REAL ESTATE BUSINESS TRUST $ 10,509,400 6 1 .19% 13,675,468 2 1.83%
PHE INC $ 10,315,583 7 1 .17% 9,506,109 4 1.27%
M DCO LLC $ 10,214,600 8 1.16 %
DUKE ENERGY CAROLINAS LLC $ 8,560,507 9 0.97%
SPORTS ENDEAVORS INC $ 8,325,260 10 0 .95 % 6,468,563 10 86.00%
PATRIOTS POINTE LLC 16,048,910 1 2.14 %
HD DEVELOPM ENT OF MARYLAND INC. 9,560,634 3 1.28 %
SLF II NC WATERSTONE LLC 8,787,240 6 1 .17%
HILLSBOROUGH COMM ONS 8,497,192 7 1.14%
MEADOWLANDS DISTRIBUTION CO 7,219,316 8 1%
BROOKSHIRE INC 6,754,661 9 1%
Total $ 129,089,656 14 .67% $ 95,351,589 97.87%
Source: Orange County Property Assessment Division
119
Town of Hillsborough, North Carolina
Water Sold by Type of Customer and In and Out of Town
Last Ten Fiscal Years
Type of Customer
2011 2012 2013 2014
Gallons billed:
In -town residential 103,459,804 102,937,205 102,755,771 111,836,111
Out-of-town residential 112,868,479 120,107,805 130,921,523 111,241,276
In -town commercial 74,881,598 73,507,962 76,624,165 78,590,500
Out-of-town commercial 18,219,706 18,296,584 18,153,125 17,908,575
Total gallons billed
309,429,587 314,849,556
328,454,584 319,576,462
Total water and sewer charges
(revenue) $ 6,405,307 $ 6,928,835 $ 7,262,510 $ 7,499,183
Total average rate per 1,000
gallons
$ 20.70 $ 22.01 $ 22.11 $ 23.47
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.
120
Table ii
2015 2016 2017 2018 2019 2020
98, 914,635 100, 064, 880 131,412,141 131, 845, 575 134, 946,195 145,561,166
124, 805, 789 100,445, 055 120,756, 780 111,132, 741 111, 898, 328 111,802,887
81,985,440 75,012,631 85,946,109 79,996,750 83,253,819 80,454,700
29,452,224 18,028,437 20,781,379 19,695,072 21,276,361 13,651,726
335,158,088 293,551,003
$ 7,859,823 $ 7,988,498
358,896,409 342,670,138
351,374,703 351,470,479
$ 8,294,061 $ 8,706,345 $ 8,706,345 $ 8,706,345
$ 23.45 $ 27.21 $ 23.11 $ 25.41 $ 24.78 $ 24.77
121
Town of Hillsborough, No rth Carolina
Water and Sewe r Rates
L ast Ten Fis cal Yea rs
Tabl e 12
In -Town Water In -Town Sewer
Out -of -Town Water Out -of -Town Sewer
Rate per Rate per Rate per Rate per Rate per Rate per Rate per Rate per
Fiscal 0-2500 1,000 0-2500 1,000 0-2500 1,000 0-2500 1,000
Year Gallons Gallons Gallons Gallons Gall ons Gall ons Gall ons Gallons
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
2017 20. 18 8. 07 30.33 12 .13 39.35 15.74 59.13 23 .65
2018 20.18 8.07 30.33 12 .13 39.35 15.74 59.13 23.65
2019 22.05 8. 82 32 .60 13.04 43.00 17.20 63.55 25.42
2020 23. 15 9. 26 34.23 13.69 45.15 18.06 66.73 26 .69
R ate changes are effective with July 1 water usage u nless otherwise stated .
The construction of a reservoir in 1998 and renovations of an aging water and wastewater treatment plant have caused significa nt increases in water and sewer
rates over the past ten years.
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 gallo ns rate .
122
Debt Capacity Information
123
Town of Hillsbo rough, No rth Ca rolina
Ratios of Outst anding Debt by Typ e
Last Ten Fiscal Ye ars
Table 13
Governmental
Activities
Business -Type Acti vities
General Total
Fiscal Installment Obligation Special Re ve nu e Premium on Re vol ving Installment Primary Per
Year Loans B onds Bonds Bonds Loan s Loans Governm ent Capita a
2011 2,736,142
2012 3,440,001
2013 3,084,791
2014 4,024,586
2015 4,606,799
2016 4,534,728
2017 4,025,201
2018 5,829,231
2019 4,632,280
2020 3,793,400
50,000
14,000
- 1,143,336 5,741,602 9,671,080 1,582
5,575,878 5,871,812 14,901,691 2,388
- 16,247,369 4,914,368 24,246,528 3,850
18,644,077 3,939,307 26,607,970 4,170
18,605,655 2,970,088 26,182,542 4,161
18,511,848 3,269,750 26,316,326 4,102
- 17,443,655 2,513,821 23,982,677 3,651
10,155,000 1,018,674 16,435,812 522,266 33,960,983 4,697
10,155,000 970,330 15,397,010 552,936 31,707,556 4,380
13,426,000 913,641 14,336,167 423,833 32,893,041 4,212
Note: Details regarding the Town's o utstandin g debt can be found in the notes to the fi nancial stateme nts.
a See Table 17 for population data. These ratios are calculated using population for the prior calendar year.
124
Town of Hillsborough, North Carolina
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
Table 14
General Bonded Debt Outstanding
General
Fiscal Obligation
Year Bonds
Total
Percentage of
Actual Taxable
Value a of Per
Property Capita b
2011 50,000 50,000 0.00%
2012 14,000 14,000 0.00%
2013 - 0.00%
2014 - - 0.00%
2015 - 0.00%
2016 - - 0.00%
2017 - 0.00%
2018 - - 0.00%
2019 - - 0.00%
2020 0.00%
Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.
a See Table 7 for property value data.
b Population data can be found in Table 17.
8
2
125
Town of Hillsborough, North Carolina
Direct and Overlapping Governmental Activities Debt
June 30, 2020
Table 15
Governmental Unit
Town's
Orange Co. Estimated
G.O. Bonds Estimated Share of
Outstanding Percentage Overlapping
Debt Applicable Debt
Debt repaid with property taxes $ 131,000,000 6.110% $ 8,004,100
Town's overlapping debt 8,004,100
Town's direct debt 3,793,400
Total direct and overlapping debt $ 11,797,500
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.
126
Town of Hillsborough, North Carolina
Legal Debt Margin Information
Last Ten Fiscal Years
2011 2012 2013 2014
Debt limit $ 59,858,619 $ 60,714,122 $ 60,985,183 $ 62,861,200
Total net debt applicable
to limit
2,736,142 3,440,001
3,084,791 4,024,586
Legal debt margin $ 57,122,477 $ 57,274,121 $ 57,900,392 $ 58,836,614
Total net debt applicable to the
limit as a percentabe of debt limit
4.57% 5.67% 5.06% 6.40%
Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of
total assessed property value.
127
Table 16
Legal Debt Margin
Calculation for Fiscal Year 2020
Assessed value $ 1,166,809,050
Debt limit (8% of assessed value) 93,344,724
Debt applicable to limit:
Installment loans (3,793,400)
Legal debt margin $ 89,551,324
2015 2016 2017 2018 2019 2020
$ 62,990,706 $ 65,754,212 $ 70,409,012 $ 84,198,890 $ 87,108,454 $ 93,344,724
4,606,799 4,534,728 4,025,201 5,829,231 4,632,280 3,793,400
$ 58,383,907 $ 61,219,484 $ 66,383,811 $ 78,369,659 $ 82,476,174 $ 89,551,324
7.31% 6.90%
5.72% 6.92% 5.32% 4.06%
128
Demographic and Economic Information
129
Town of Hillsbo rough, N orth Car olina
De mographic and Economic Statistics
Last Ten Fiscal Yea rs
Table 17
Pers onal Per
Income Capita
(thousands Pers onal Median S chool Unemployment
Year Populati on of dollars) Inc ome Age Enr ollment Rate
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 1,370 4.8%
2015 6,292 5,287,926 37,658 33.50 1,393 3 .9 %
2016 6,415 * 27,575 35.70 1,408 4.6%
2017 6,568 * 24,567 35 .90 1,325 3.7%
2018 7,231 * 30,830 35 .70 1,302 3 .0%
2019 7,239 * 25,780 36.60 1,319 3.3%
2020 7,809 * 34,697 38.60 1,219 5.9%
No te: 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 re ported for the month of June of each year.
* In fo rmatio n not available pe r Orange County Economic Development
Sources : Population and median age in fo rmation provided by the State Library of North Carolina. Personal i nc ome information provided by the Orange Cou nty
Economic Development Office. Unemployment data provide d by the Employment Security Commission. School enrollment data provided by the Orange
County Board of Education.
No te: Po pulation, median age, and education level information are based on surveys conducted during the last quarter of the calendar y ear . Personal income
information is a total for the year. Unemplo yment rate information is an adjusted yearly average. School e nrollment is based on the census at the start of the
school year.
130
Town of Hillsborough, North Carolina
Principal Employers
Current Year and Nine Years Ago
Table 18
Employer
Orange County Government
Orange County Schools
UNC Hospital
Summit Consulting -Engineering
Sports Endeavors, Inc. dba Eurosport
Wal-Mart Associates Inc
Brookshire Inc
Home Depot
Weaver Street Market, Inc
PHE
OE Enterprises, Inc
Warran-Hay
Thalle
Total
2020 2011
Percentage Percentage
of Total of Total
Town Town
Employees Population Employees Population
1,272 19.83% 818 13.38%
1,167 18.19% 1,249 20.43%
600 9.35%
342 5.33%
. . . . . . . .. . . . . . . ...
0.00% 550 9.00%
200 3.12% 300 4.91%
184 2.87% 129 2.11%
150 2.34% 95 1.55%
141 2.20%
365 322 5.27%
139 2.27%
101 1.65%
96 1.57%
3,149 43.40% 2,885 47.19%
Source: Town Economic Development Division and Employment Security Commission.
Note: Information regarding Town's total employment is not available.
* Data not available
131
Town of Hillsborough, North Carolina
Full -Time Equivalent City Government Employees by Function/Program
Last Ten Fiscal Years
Table 19
Function/Program 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
General government
Administration 4 3 3 5 5 7 9 7.25 9.5 9.25
Finance 4 4 4 4 4 5 5 6 5.3 3.40
Information Services 1.00
Planning 3 3 3 4 4 5 5 5 5 4.00
Public space 1 2 2 2.00
Safety 1 1 1 1 1 1 1 1 1 1.00
Stormwater - 1 1 1 2 3 3 3.00
Police
Officers 26 25 27 24 28 26 28 29.33 27.75 24.1
Civilians 2 - 1 1 2
Public works
Streets 4 3 3 3 4 4 4 4 4 4
Sanitation 4 4 4 4 4 4 3 4 4 3
Motor pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 4 4 4 4 4 4 4 3 3 4
Billing and collection 5 5 5 5 6 6 6 4.50 4.5 3.35
Water 6 6 6 6 6 6 6 8 8 7
Wastewater 8 8 8 7 6 6 8 6 6 5
Water distribution/
wastewater collection 8 11 11 11 11 12 10 13 13 12
Fire inspections 1 1 1 1 1 1 1.5 1.40 1.4 1.8
Total 83 81 83 83 88 91 95.5 101.48 101.45 92.90
Source: Town Finance Office. Positions reported at June 30th are positions filled.
132
Operating Information
133
Town of Hillsborough, North Carolina
Operating Indicators by Function/Program
Last Ten Fiscal Years
Function/Program
2011 2012 2013 2014
Police
Physical arrests 475 560 538 521
Calls for service 12,889 15,039 14,569 12,279
Traffic citations 1,182 1,134 1,651 1,212
Number of policeman positions 29 29 26 26.5
Fire
Number of stations 1 1 1 1
Emergency responses (EMS and fire) 1,835 1,770 1,866 1,950
Fires extinguished 19 78 70 45
Number of paid firemen 24 25 24 24
Number of volunteers 12 14 19 15
Inspections 211 258 177 132
Refuse collection
Refuse collected (tons per day) 5.95 - 6.34 5.90
Recyclables collected (tons per day) * * 0.02
Other public works
Street resurfacing (miles) - 2.25 2.13
Potholes repaired 41 36 30 36
Parks and recreation
Number of parks 6 6 6 6
Library
Volumes in collection 86,526 97,536 93,421 93,886
Total volumes borrowed 287,938 351,216 397,379 396,164
Water
New connections 815 767 736 799
Water main breaks 10 30 20 15
Average daily consumption
(millions of gallons per day) 1.129 1.048 0.913 1.103
Peak daily consumption
(millions of gallons) 1.653 1.576 1.653 1.685
Wastewater
Average daily sewage treatment
(millions of gallons) 0.757 0.765 0.902 1.133
Education
Number of schools a 3 3 3 3
Number of teachers 111 113 113 112
Number of students 1,305 1,420 1,433 1,370
Number of classrooms b 65 65 65 65
Sources: Various city departments.
a Alternative school added for students who have not been successful in the traditional school setting in FY06
b Core classes only reported in FY11, FY12 and FY13
Data used from previous year
134
Table 20
2015 2016 2017 2018 2019 2020
553 492 611 640 640 658
15,975 16,674 10,599 13,287 13,287 16,233
725 557 567 496 496 603
27 29 29 29 29 29
1 1 1 1 1 1
1,978 1,949 1,954 2,034 2,059 1,880
107 80 109 113 92 66
27 22 23 24 24 26
12 12 12 12 10 8
171 163 138 155 138 168
5.54 6 6 6.25 6.76 6.76
0.48 1 1 1.00 1.00 1.00
4.7 2 2 2.38 0.90 2
30 25 15 8.00 10.00 15.00
6 7 7 7 7 7
93,656 96,393 101,177 96,498 90,378 98,331
412,416 446,499 382,740 403,088 400,858 285,212
840 946 821 223 988
11 27 33 23 8 25
1.071 1.401 1.453 0.963 1.656 1,464
1.815 1.983 2.431 2.058 3.176 2,501
0.895 1.185 1.000 0.951 1.236 1.011
3 3 3 3 3 3
112 112 112 115 103 126
1,393 1,408 1,325 1,342 1,319 1,219
65 65 65 65 ` 65 ` 70
135
Town of Hillsborough, North Carolina
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Function/Program
2011 2012 2013 2014
Police
Stations 2 2 2 2
Patrol units 28 27 26 27
Fire stations 1 1 1 1
Refuse collection
Collection trucks > 6 7 7 8
Other public works
Streets (miles) - paved 36.15 36.15 36.15 36.15
Streets (miles) - unpaved 0.73 0.73 0.73 0.91
Streetlights 633 633 633 678
Traffic signals (all state-owned) - -
Parks and recreation
Acreage b 72.62 74.10 74.10 74.10
Playgrounds 4 4 4 4
Water
Water mains (miles) 147.0 148.0 148.0 150.0
Fire hydrants 614 663 621 619
Storage capacity (thousands of gallons) 3,000 3,000 3,000 3,000
Wastewater
Sanitary sewers (miles) 86.4 89.0 93.0 93
Treatment capacity (millions of gallons) 3.0 - 3.0 3
Stormwater
Catch basins and inlets
Storm sewers (miles) a 73.0 73.0 73.0 75
Area (square miles) 5.740 5.740 5.760 5.80
Sources: Various city departments.
Note: No capital asset indicators are available for the general government or library function.
a Storm sewer data not available.
b Includes two parks owned by the Town but are located outside of the city limits.
2012 figure included private hydrants - 2013 actual number of hydrants from GIS
^ Estimated
> Includes brush and leaf trucks 2009 forward
136
Table 21
2015 2016
2017 2018 2019 2020
2 2 2 2 2 2
27 25 24 34 34 34
1 1
8 8
8
8 8 8
37.63 33.96 33.96 33.96 33.52 33.52
0.69 0.68 0.68 0.68 0.68 0.68
679 709 709 711 726 726
74.10 74.1 74.1 74.1 74.1 74.1
4 5 5 5 5 5
151.0 149.0 151.0 151.0 151.0 151.0
628 628 705 705 705 705
3,000 3,500 2,450 2,450 2,450 2,450
94.0 96.5 80.5 97 101.4 98.8
3.0 3.0 3.0 3.0 3.0 3.0
491 491 491
75.0 75.0 75.0 43.6 43.6 43.6
5.800 6 6 6 6.07 6.07
137
Other Disclosures
138
Town of Hillsborough, North Carolina
Continuing disclosure information related to utility revenue bonds
The Town presents the information in this section in accordance with its continuing
disclosure obligations related to its Combined Utility Systems Revenue Bonds, Series
2018.
The Water System
General - Capacity and consumption. The Town's water distribution system
currently consists of approximately 157 miles of water lines, five water storage tanks
and four water distribution booster pump stations. The Town's average daily water
consumption for calendar year 2019 was approximately 1.584 million gallons per day
("MGD"). In addition, the Town owns and operates one water treatment plant (the
"Water Treatment Plant"). The Water Treatment Plant currently has a 3 MGD
treatment capacity with the ability to expand up to 6 MGD.
Water Rates. The Town provides water services to customers inside and
outside the limits of the Town. Each utility account is charged (i) for usage of zero to
2,500 gallons, a fixed Block 1 Rate that is the same for all customers, regardless of
meter size, and (ii) for usage over 2,500 gallons, a Block 2 Rate per 1,000 gallons used.
It is expected that the Town's Board of Commissioners will consider proposed rate
increases as part of the Town's normal budget -setting process in June 2021.
Current monthly water rates are set forth below:
All Customers (both non -irrigation and irrigation meters)
In Town Water Block 1
In Town Water Block 2
Outside Town Water Block 1
Outside Town Water Block 2
$23.15
$9.26/1,000
gallons
$45.15
$18.06/1,000
gallons
The Town charges a one-time $3,864.00 water residential capital facilities fee
for new development. With respect to non-residential users, the Town charges a
139
Town of Hillsborough, North Carolina
water capital facilities fee based on water service tap size. The fees are set forth in
the table below. See "System Development Fees" below.
Size Fee
5/8" or 3/4" $ 3,864
1" 6,440
1 1/2" 12,880
2" 20,608
3" 41,216
4" 64,400
6" 128,800
8" 206,080
10" 540,960
Other Fees and Charges. The Town charges other fees for various purposes,
including, but not limited to, deposits for customers, late payment fees, delinquent
fees, and reconnection fees.
Number of Active Customer Accounts. The following table shows the number
of active water customer accounts as of June 30, 2020.
Number of
Number of Inside Outside Town
Town Accounts Accounts
3,652
Total
2,747 6,399
As of June 30, 2020, the water system's customers were comprised of
approximately 91% residential customers (including multi -family accounts) and 9%
commercial customers.
Major Water Customer Accounts. The following table provides information on
the top ten customer accounts of the water system (by annual revenues from water
charges) for the fiscal year ended June 30, 2020, the water consumption for each such
customer account, the annual revenue generated by each such account and the
percentage of the total annual revenues for the water system generated by each such
account.
140
Town of Hillsborough, North Carolina
Customer Account
Percentage of
Total Water
Annual Water System
Revenues Revenues
UNC Central Utility Building $84,544 110%
LHNH - Patriots Pointe 68,371 1.37
Partners, LLC
Horizon Acquisitions 3 LLC 66,728 1.34
Cates Creek Apartments 65,766 1.32
UNC Hospital 64,361 1.29
Orange County 64,152 1.29
State of North Carolina 62,876 1.26
Orange County High School 50,652 1.02
Al Curt Hillsborough, LLC 47,431 0.95
Orange County Finance Dept. 38,669 0.78
Total $613,550 12.32%
Note: Totals may not foot due to rounding.
The Sanitary Sewer System
General - Capacity and usage. The Town's sanitary sewer system provides
wastewater collection, treatment and disposal. The Town operates one wastewater
treatment plant (the "Wastewater Treatment Plant"), 101 miles of wastewater lines
and 24 wastewater pump stations. The Wastewater Treatment Plant was originally
built in 1977 as a 3.0 MGD treatment facility which discharges to the Eno River. The
Wastewater Treatment Plant was upgraded in 2014, and its current treatment
capacity of 3.0 MGD is sufficient to meet future needs of the Town. The current
average daily treated discharge of the Wastewater Treatment Plant is 0.75 MGD.
Sanitary Sewer Rates. The Town provides sanitary sewer services to residents
inside and outside the limits of the Town. Each utility account is charged (i) for usage
of zero to 2,500 gallons, a fixed Block 1 Rate that is the same for all customers
regardless of meter size, and (ii) for usage over 2,500 gallons, a Block 2 Rate per one
thousand gallons used, which is based on 100% of a customer's water consumption
141
Town of Hillsborough, North Carolina
as set forth in the table below. It is expected that the Town's Board of Commissioners
will consider rate increases as part of the Town's normal budget -setting process in
June 2021.
Current monthly sanitary sewer rates are set forth below:
All Customers
In Town Sewer Block 1 $34.23
In Town Sewer Block 2 $13.69/1,000 gallons
Outside Town Sewer Block 1 $66.73
Outside Town Sewer Block 2 $26.69/1,000 gallons
The Town charges a one-time $3,243 sewer residential unit capital facilities fee
for new development. With respect to non-residential users, the Town charges a
sanitary sewer capacity fee based on the water service tap size. The fees are set forth
in the table below. See "System Development Fees" below.
Size Fee
5/8" or 3/4" $3,243
1" 5,405
1 1/2" 10,810
2" 17,296
3" 34,592
4" 54,050
6" 108,100
8" 172,960
10" 454,020
Other Fees and Charges. The Town charges other fees for various purposes,
including, but not limited to, deposits for customers, late payment fees, delinquent
fees, and reconnection fees.
Number of Active Customer Accounts. The following table shows the number
of active sanitary sewer customer accounts as of June 30, 2020:
142
Town of Hillsborough, North Carolina
Number of Inside
Town Accounts
3,464
Number of
Outside Town
Accounts
1,244
Total
4,708
As of June 30, 2020, the sanitary sewer system's customer account mix was
approximately 91% residential (including multi -family accounts) and 9%
commercial and industrial.
Major Sanitary Sewer Customer Accounts. The following table provides
information on the top ten customer accounts of the sanitary sewer system (by
annual revenues from sewer charges) for fiscal year 2020, and the percentage of total
annual sanitary sewer revenues generated by each such customer account. Sewer
usage is not metered. Water usage is applied to the sewer rates to calculate sewer
charges.
Customer Account
LHNH - Patriots Pointe Partners,
LLC
Horizon Acquisitions 3, LLC
Cates Creek Apartments
UNC Hospital
Orange County
State of North Carolina
Orange High School
Al Curt Hillsborough, LLC
Orange County Finance Dept.
Weaver Street Market
Total
Note: Totals may not foot due to rounding.
Annual
Sanitary Sewer
Revenues
$101,080
98,614
97,228
95,152
94,063
92,956
74,856
70,123
57,168
51,714
$832,954
Percentage of
Total Annual
Sanitary Sewer
Revenues
2.02%
1.97
1.95
1.90
1.88
1.86
1.50
1.40
1.14
1.04
16.66%
143
Compliance Section
144
Cherry Bekaert"°
CPAs & Advisors
Report of Independent Auditor on Internal Control over Financial Reporting
and Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
To the Honorable Mayor and Town Council
Town of Hillsborough
Hillsborough, North Carolina
We have audited, in accordance with the 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,
the business -type activities, each major fund, and the aggregate remaining fund information of the Town of
Hillsborough, North Carolina (the "Town"), as of and for the year ended June 30, 2020, and the related notes to
the financial statements, which collectively comprise the Town's basic financial statements, and have issued our
report thereon dated November 18, 2020. The financial statements of the Hillsborough Tourism Board and the
Hillsborough Tourism and Development Authority 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") as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion 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 a 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 was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider material weaknesses. However, material weaknesses may exist that have not been
identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town'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 financial statements.
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 no instances of
noncompliance or other matters that are required to be reported under Government Auditing Standards.
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 result of that testing, and not to provide an opinion on the effectiveness of the Town'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 Town's internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
LLP
Raleigh, North Carolina
November 18, 2020