HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2019TOWN OF HILLSBOROUGH
NORTH CAROLINA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR FISCAL YEAR ENDED JUNE 30, 2019
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 i
Organization Chart ii
Letter of Transmittal iii
GFOA Certificate of Achievement x
Financial Section
Independent Auditors' Report 1
Management's Discussion and Analysis 5
Basic Financial Statements
Exhibit Government -Wide Financial Statements:
1 Statement of Net Position 16
2 Statement of Activities 18
Fund Financial Statements:
3 Balance Sheet - Governmental Funds 22
4 Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental
Funds 24
5 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - General Fund 26
6 Statement of Net Position - Proprietary Funds 27
7 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 28
8 Statement of Cash Flows - Proprietary Funds 29
9 Statement of Fiduciary Net Position - Fiduciary Fund 31
Notes to Financial Statements 33
Required Supplementary Financial Data
Exhibit
Law Enforcement Officers' Special Separation Allowance Required Supplementary
Information:
A Schedules of Changes in Total Pension Liability 66
Law Enforcement Officers' Special Separation Allowance Required Supplementary
Information:
B Schedules of Total Pension Liability as a Percentage of Covered Payroll 67
C Schedule of Changes in the Total OPEB Liability and Related Ratios 68
Local Government Employees' Retirement System Required Supplementary
Information:
D-1 Schedules of Proportionate Share of Net Pension Liability (Asset) 69
D-2 Schedules of Contributions 70
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 72
2 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Town Barn Improvements Capital Project Fund 77
3 Combining Balance Sheet - Nonmajor Governmental Funds 78
4 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Nonmajor Governmental Funds 80
5 Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and
Actual - General Capital Projects Fund — Nonmajor Capital Project Fund 82
6 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Capital Reserve Fund — Nonmajor Capital Project Fund 83
7 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Downtown Improvements Capital Project Fund - Nonmajor Capital Project
Fund 84
8 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk CMAQ Capital Project Fund - Nonmajor Capital Project Fund 85
9 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - Rail Station Capital Project Fund - Nonmajor Capital Project Fund 86
10 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Public Works Building Capital Project Fund - Nonmajor Capital Project Fund 87
Enterprise Funds:
11 Schedule of Revenues - Budget and Actual (Non-GAAP) - Water and Sewer Fund 88
12 Schedule of Expenditures - Budget and Actual (Non-GAAP) - Water and Sewer Fund 89
13 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Projects Fund 92
14 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund 93
15 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Stormwater Fund 94
Fiduciary Fund:
16 Statement of Changes in Assets and Liabilities - Special Assessment Debt Agency
Fund 95
Other Schedules
17 Schedule of Ad Valorem Taxes Receivable 98
18 Analysis of Current Tax Levy 99
Town of Hillsborough, North Carolina
Statistical Section
Table Financial Trends Information:
1 Net Position by Component 104
2 Changes in Net Position... 106
3 Fund Balances, Governmental Funds 110
4 Changes in Fund Balance, Governmental Funds 112
Revenue Capacity Information:
5 Program Revenues by Function/Program 116
6 Tax Revenues by Source, Governmental Funds 118
7 Assessed Value and Actual Value of Taxable Property 119
8 Direct and Overlapping Property Tax Rates 120
9 Property Tax Revenue and Collections 121
10 Principal Property Taxpayers 123
11 Water Sold by Type of Customer and In and Out of Town 124
12 Water and Sewer Rates 126
Debt Capacity Information:
13 Ratios of Outstanding Debt by Type 128
14 Ratios of General Bonded Debt Outstanding 129
15 Direct and Overlapping Governmental Activities Debt 131
16 Legal Debt Margin Information 132
Demographic and Economic Information:
17 Demographic and Economic Statistics 135
18 Principal Employers 136
19 Full -Time Equivalent City Government Employees by Function/Program 137
Operating Information:
20 Operating Indicators by Function/Program 140
21 Capital Asset Statistics by Function/Program 142
Other Disclosures
Continuing Disclosure Information Related to Utility Revenue Bonds 146
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 153
Independent Auditors' Report on Compliance for the Major Federal Program and on
Internal Control over Compliance in Accordance with OMB Uniform Guidance and
the State Single Audit Implementation Act 155
Schedule
19 Schedule of Findings and Questioned Costs 157
Schedule
20 Summary Schedule of Prior Audit Findings 159
Schedule
21 Schedule of Expenditures of Federal and State Awards 160
Notes to Schedule of Expenditures of Federal and State Awards 161
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Introductory Section
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Town of Hillsborough Board of Commissioners 2018-2019
From left: Commissioner Kathleen Ferguson, Mayor Pro Tem lean Weaver,
Commissioner Matt Hughes, Mayor Tom Stevens, and
commissioners Evelyn Lloyd and Mark Bell
Tom Stevens — Mayor
Jenn Weaver — Mayor Pro Tern
Evelyn Lloyd — Commissioner
Mark Bell — Commissioner
Matt Hughes — 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
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
Utilities
Administration
Water Treatment
Plant
Wastewater
Treatment Plant
Water Distribution &
Wastewater
Collection
Stormwater
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January 10, 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,
2019 is submitted for your review and use. The Town, like all other local governments in the state, is required by
state law to publish a complete set of financial statements within four months of the close of each fiscal year.
Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all
disclosures, rests with the Town. As management, we assert that, to the best of our knowledge, this financial report
is complete and reliable in all material respects and is reported in a manner designed to fairly present the financial
position and results of the operations of the governmental and business -type activities. All disclosures necessary
to gain the maximum understanding of the Town's financial affairs have been included.
The Town's management is responsible for establishing and maintaining an internal control structure that is
designed to ensure the Town's assets are protected from loss, theft or misuse, and to ensure adequate accounting
data are compiled to allow for the preparation of financial statements which conform with accounting principles
generally accepted in the United States of America (GAAP). Since the cost of internal controls should not outweigh
their benefits, the Town's internal control structure has been designed to provide reasonable rather than absolute
assurance that the financial statements will be free from material misstatement.
North Carolina statutes and the Town's Ordinance require an annual audit by independent certified public
accountants. The accounting firm of Dixon Hughes Goodman LLP, a firm of licensed certified public accountants,
was selected and awarded the contract for Fiscal Year 2019. 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.
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 7,239 residents have easy
access to employment opportunities within
the Research Triangle Park area. Within
Hillsborough, the economy is centered on
government, retail, service providers, and
manufacturing. Orange County and the
Town of Hillsborough are major local
employers. The Town's historical sites
attract a large number of tourists.
The Town is operated under the council-
manager form of government. Commissioners on the five -member, nonpartisan board serve four-year staggered
The Ruffin-Roulhac House (c.1821) outbuildings and reconstructed barn on the
property are currently being used as Town offices.
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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.
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 1.543 MGD. The Town's water
system serves a total of 6,133 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 0.86
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.
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 town government.
➢ 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 a number of state and
The pollinator demonstration garden at Gold Park was a factor in Hillsborough earning federal mandates for environmental
a Bee City USA status. stewardship.
➢ The town has partnered with Orange County for curbside collections of recyclables throughout 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.
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> 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 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 2019 was 3.3% for Orange
County, while the state and national rates were 4.2% and 3.7%, respectively. The Town's economy is expected to
remain stable because of the benefits derived from a low unemployment rate, a stable employment base, tourism,
and the development of six residential neighborhoods.
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
building designed and built by local builder John Berry. The courthouse is still in use for county judicial business
and 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 located in Hillsborough and serves thirteen schools throughout the
county. Three of the thirteen schools are in Hillsborough.
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"
building features which 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 Geriatric Emergency
Department Accreditation (GEDA) from the American College of Emergency Physicians (ACEP). The certifies that
staff have been specially trained to assess older patients in a more comprehensive way. 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.
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
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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
Hillsborough is rich with museums and historical sites.
➢ Alexander Dickson House (late 18"' -century)
> 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)
Riverwalk Greenway is a paved, ADA accessible, urban
greenway along the Eno River that stretches nearly 2 miles
from Occoneechee Speedway to Gold Park.
The Hillsborough Handmade Parade is a Mardi Gras style street parade.
> 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)
Recreation, sports and leisure opportunities abound in
Hillsborough.
> Eno River State Park
> Exchange Club Park
> Fairview Park
> Gold Park
➢ Hillsborough Heights Tot Lot Park
> Kings Highway Park
> Turnip Patch Park
> Historic Occoneechee Speedway Trail
➢ Occoneechee Golf Club
➢ Occoneechee Mountain State Natural Area
➢ Riverwalk Greenway
➢ Triangle Area Polo Club & Arena
➢ Orange County Sporstplex
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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.
➢ Waterstone is comprised of single family and townhome developments as well as apartment homes.
Construction began in 2014 with the final permits being issued in FY2017. When complete, the
development will add over 500 residential units and more than 1,000 residents to Hillsborough.
> Forest Ridge is a 233 single-family unit project on U.S. 70 A.
➢ Elfin's Pond includes 118 townhomes on 24 acres at the intersection of Orange Grove Road and Eno
Mountain Road.
> The Fiori Hill project plan proposes 46 single-family dwellings on 17.6 acres adjacent to Forest Ridge.
> Bellevue Mill is a renovation project to convert the former fabric mill building into an apartment building
with 114 units. The project footprint is 19.8 acres located on Nash Street.
> The Collins Ridge master plan includes 950 dwellings (houses, townhouses and apartments) and 88
affordable rental units. Construction is scheduled to start in 2020 with the first homes being completed by
the end of the calendar year.
Long -Term Financial Planning
Each year, the Town prepares a multiyear operational and capital improvement budget. Additionally, a balanced
scorecard system is used to implement and communicate the board's mission, vision, and strategic priorities. Multi-
year budgeting encourages the town to look forward to identify, address, and mitigate potential problems while they
are still manageable. The pressure of new development bringing more residents, businesses, and visitors to
Hillsborough tests the strategy of assembling a budget that meets current and future demands. In recent years, a
simple approach has been used to categorize and help balance the various wants and needs facing the Town. The
following three principles are used as a guide in developing the budget and financial plan; take care of what we
already have, invest in Hillsborough's future and minimize rate impacts on our community.
Take Care of What We Already Have
This strategy focuses on taking care of the current infrastructure, equipment, employees and organizational
structure. The Town's mission, vision, strategic priorities and objectives can't be implemented if these basic tools
of service implementation are not in working order. The longer a municipality waits to address, repair or replace
these assets, the more expensive it becomes in the long term. For example, ensuring the organizational structure
and resources are in place to maintain parks is equally as important as building the parks themselves. Hence,
construction of new assets must be balanced with the personnel, equipment, and organization to operate and
maintain them, which is critical in avoiding overextension of resources.
Invest in Hillsborough's Future
Investing in the future involves identifying specific projects, programs, services and infrastructure improvements
likely to make Hillsborough a better place to live, work, visit and start a new business. Sound growth is necessary
to support the improvements and services desired by the citizenry, and to make Hillsborough an affordable place
to live.
Minimize Rate Impacts on the Community
If rate increases are deemed necessary, work to keep those costs on tax and rate payers as low as can reasonably
be managed.
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:
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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.
> Congestion Mitigation and Air Quality (CMAQ) Grant Sidewalk, Pedestrian Safety and Accessibility
Project - Pedestrian and bicycle connectors for Nash, Calvin and Allison streets; sidewalk/accessibility;
curb, gutter and other improvements; and connections for Gold Park and Riverwalk. This would complete
the western connection from Gold Park to Allison Street and add a sidewalk with access trails near
Occoneechee Mountain State Natural Area. The project cost of $124,000 to leverage $496,000 of CMAQ
funds was underway in FY2017 and completed in FY2019.
Water and Sewer Fund
> Reservoir Phase II -To address long-term water supply needs and accommodate the type of growth that
match the Town's vision, Phase 2 expansion of the West Fork Eno River Reservoir began construction in
April 2018. The first series of two revenue bonds were sold on May 9, 2018 providing over $11.1 million in
funding for the project. The remaining funds will be raised through another revenue bond sale in early 2020
to pay for the remaining two road projects required to finish the project. Debt payments for the project are
estimated at $568,513 for FY20, $978,089 in FY21 and $976,924 in FY22. Phase 2 will yield an additional
1.2 million gallons per day of water capacity.
Stormwater Fund
> Valley Forge Stormwater Project — The purpose of this 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.
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 $4,380 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 21 fiscal years, and no debt
service expenditures on general obligation bonded debt have been incurred in the General Fund during the last 21
fiscal years. The Town has avoided a heavy debt load, which has plagued many municipalities, in its General Fund.
Debt service costs make up 12.42% 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. Debt payments account for 21.75% 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.
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, 2018. The Certificate of Achievement is a prestigious
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national award recognizing conformance with the highest standards for preparation of a state and local government
financial report.
To be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently
organized comprehensive annual financial report that conforms to program standards. The annual report must
satisfy both generally accepted accounting principles and applicable legal requirements. 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 24 consecutive years (fiscal years ended 1994 through 2018). We believe our current report continues
to conform to the Certificate of Achievement program requirements, and we will submit it to the GFOA.
Acknowledgments
We appreciate the assistance and dedication of the Finance Department staff throughout the year, especially during
the preparation of this report. We would like to thank all members of the department who contributed to its
preparation and to the independent certified public accountants, Dixon Hughes Goodman LLP, for their assistance.
The cooperation of each Town department is appreciated, as we work together in conducting the Town's financial
operations. We also express our appreciation to the mayor and the members of the Board of Commissioners for
their continued support, guidance, and advice in planning and conducting the financial activities of the Town in a
responsible and progressive manner
Respectfully submitted,
`- E . Peterson
Town Manager
S`
Daphna Schwartz, CPA
Finance Director
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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, 2018
P
Executive Director/CEO
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Financial Section
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DHG
DIXON HUGHES GOODMAN LLP
Independent Auditors' Report
Honorable Mayor and Members
of the Board of Town Commissioners
Town of Hillsborough
Hillsborough, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the Town of Hillsborough, North Carolina, as of and for the year ended
June 30, 2019, and the related notes to the financial statements, which collectively comprise the Town of
Hillsborough's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The
financial statements of the Hillsborough Tourism Development Authority and the Hillsborough Tourism
Board were not audited in accordance with Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors' judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall financial statement presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
1
DHG
DIXON HUGHES GOODMAN LLP
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of the Town of
Hillsborough, North Carolina, as of June 30, 2019, and the respective changes in its financial position and
cash flows, where appropriate, thereof, and the respective budgetary comparison for the General Fund for
the year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management's
Discussion and Analysis on pages 5 through 14, the Law Enforcement Officers' Special Separation
Allowance Schedules of Changes in Total Pension Liability and Total Pension Liability as a Percentage of
Covered Payroll, and the Schedule of Changes in the Total OPEB Liability and Related Ratios on pages
66 through 68, respectively, and the Local Government Employees' Retirement System's Schedules of
Proportionate Share of Net Pension Liability (Asset) and Contributions on pages 69 and 70, respectively,
be presented to supplement the basic financial statements. Such information, although not a part of the
basic financial statements, is required by the Governmental Accounting Standards Board who considers it
to be an essential part of the financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States
of America, which consist of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not
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 of Hillsborough's basic financial statements. The introductory section, combining and
individual fund financial statements, budgetary schedules, other schedules, and the statistical section are
presented for purposes of additional analysis and are not a required part of the basic financial statements.
The Schedule of Expenditures of Federal and State Awards is presented for purposes of additional analysis
as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the State Single Audit
Implementation Act, and is also not a required part of the basic financial statements.
The combining and individual fund financial statements, budgetary schedules, other schedules, and the
Schedule of Expenditures of Federal and State Awards are the responsibility of management and were
derived from and relate directly to the underlying accounting and other records used to prepare the basic
financial statements. Such information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the basic financial
statements or to the basic financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, based on our
audit, the procedures performed as described above, the combining and individual fund statements,
budgetary schedules, other schedules, and the Schedule of Expenditures of Federal and State Awards are
fairly stated, in all material respects, in relation to the basic financial statements as a whole.
2
DHG
DIXON HUGHES GOODMAN LLP
The introductory information, statistical section, and the continuing revenue bond disclosures have not been
subjected to the auditing procedures applied in the audit of basic financial statements, and accordingly, we
do not express an opinion or provide assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 10,
2020, on our consideration of the Town of Hillsborough's internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and
other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance, and the results of that testing, and not to provide an opinion on internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the Town of Hillsborough's internal control
over financial reporting and compliance.
Di%epn 4fitie.4 amtbita4 at"
High Point, North Carolina
January 10, 2020
3
This page left intentionally blank.
4
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, 2019.
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 $78,240,838.
• The Town's total net position increased by $7,471,440 primarily due to general fund revenues
coming in over budget.
• As of the close of the current fiscal year, the Town's governmental funds reported ending fund
balances of $7,465,418, a net decrease of $845,868 from the prior year. This is the result of the
capital project activity. Approximately 50.32% of this total amount or $3,757,005 is nonspendable,
or restricted.
• At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,779,628,
or 39.50% of total General Fund expenditures, including other financing uses, for the fiscal year.
• The Town's total debt decreased by $2,253,427 during the current fiscal year due to retirement of
existing debt during the year.
• 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.
Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside of the
government. The Town of Hillsborough has one fiduciary fund, which is an agency fund. This fund accounts for the
Special Assessment Revenue Bonds used to finance the construction of public infrastructure in the Waterstone
District.
Notes to the Financial Statements - The notes provide additional information that is essential to a full
understanding of the data provided in the government -wide and fund financial statements. The notes to the financial
statements are on pages 33 through 64 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 66 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
2019 2018 2019 2018 2019 2018
Current assets $ 9,071,171 $ 9,600,900 $ 20,377,576 $ 23,275,801 $ 29,448,747 $ 32,876,701
Other assets - - - -
Capital assets, net 23,997,360 22,473,237 61,735,518 54,999,537 85,732,878 77,472,774
Total assets 33,068,531 32,074,137 82,113,094 78,275,338 115,181,625 110,349,475
Deferred outflows of
resources 1,336,851 821,829 562,168 373,375 1,899,019 1,195,204
Long-term liabilities
outstanding 8,228,935 8,770,244 28,647,755 29,407,519 36,876,690 38,177,763
Other liabilities 484,748 917,451 1,325,865 1,568,633 1,810,613 2,486,084
Total liabilities 8,713,683 9,687,695 29,973,620 30,976,152 38,687,303 40,663,847
Deferred inflows of
resources 109,915 72,040 42,588 39,394 152,503 111,434
Net position:
Net investment in
capital assets 20,511,801 18,580,077 38,536,890 36,693,299 59,048,691 55,273,376
Restricted 3,757,005 3,089,866 2,677,877 2,631,171 6,434,882 5,721,037
Unrestricted 1,312,978 1,466,288 11,444,287 8,308,697 12,757,265 9,774,985
Total net position, ending $ 25,581,784 $ 23,163231 $ 52,659,054 $ 47.633.167 $ 78,240,838 $ 70.769,398
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 $78,240,838 as of June 30, 2019. The Town's net position increased by $7,471,440
for the fiscal year ended June 30, 2019. However, the largest portion (75.47%) 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, $6,434,882 (8.22%) represents resources
that are subject to external restrictions on how they may be used. The remaining balance of $12,757,265 (16.31%)
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
2019 2018 2019 2018 2019 2018
Revenues:
Program revenues:
Charges for services $ 210,734 $ 595,400 $ 12,549,822 $ 10,887,711 $ 12,760,556 $ 11,483,111
Operating grants
and contributions 221,637 197,119 32,361 253,998 197,119
Capital grants and
contributions 3,379,916 1,634,422 363,598 3,379,916 1,998,020
General revenues:
Property taxes 6,510,109 6,700,510 6,510,109 6,700,510
Local option sales
taxes 1,708,025 1,486,817 - 1,708,025 1,486,817
Gross receipts on
short-term rental
property 13,593 9,657 13,593 9,657
Privilege licenses 875 1,160 875 1,160
Motor vehicle license
fees - 260 - 260
Solid waste disposal 5,472 4,465 5,472 4,465
Unrestricted inter-
governmental
revenues 1,135,259 1,080,184 - - 1,135,259 1,080,184
Other (1,825,6461 192,778 2,365,272 (202,014) 539,626 (9 236)
Total revenues 11,359,974 11,902,772 14,947,455 11,049,295 26,307,429 22,952,067
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,
previously reported
Cumulative effect
adjustment
Governmental Activities
2019 2018
Business -Type Activities Total
2019 2018
$ 1,865,007 $ 1,865,408 $ - $
4,705,989 4,666,798
718,593 684,226
468,057 478,122 - -
488,592 498,150
34,311 42,038 - -
493,868 429,684
140,004 114,957 - -
566,231 458,118
9,355,337 8,949,652
2019 2018
$ 1,865,007
4,705,989
718,593
468,057
488,592
34,311
493,868
140,004
566,231
9,355,337
8,914,421 8,779,383 9,921,568 9,407,770 18,835,989
2,445,553 3,123,389 5,025,887 1,641,525 7,471,440
23,136,231 20,682,771 47,633,167 46,371,568 70,769,398
Net position, beginning,
adjusted 23,136,231
Net position, ending $ 25,581,784
(669,929) (379,926)
20,012,842 47,633,167 45,991,642 70,769,398
$ 23 136,231 $ 52,659,054 $ 47,633,167 $ 78,240,838
$ 1,865,408
4,666,798
684,226
478,122
498,150
42,038
429,684
114,957
458,118
8,949,652
18,187,153
4,764,914
67,054,339
(1,049,855)
66,004,484
$ 70.769.398
Governmental activities. Governmental activities increased the Town's net position by $2,445,553, thereby
accounting for 32.73% of the total growth in the net position of the Town of Hillsborough. Key elements of this
increase are as follows:
• Continued diligence in the collection of property taxes.
• Increases in capital grants and contributions.
• Increases in local option sales tax revenue.
Business -type activities. Business -type activities increased the Town's net position by $5,025,887, accounting
for 67.27% of the total growth in the government's net position. Key elements of this increase are as follows:
• Increase in charges for services due in part to population growth.
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 $4,503,694, while total fund balance reached
$7,955,027. 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 47.06% of general fund expenditures, while total fund balance represents 83.13% of
the same amount.
At June 30, 2019, the governmental funds of the Town reported a combined fund balance of $7,465,418, with a net
decrease in fund balance of $845,868. This decrease is primarily related to capital project expenditures.
General fund budgetary highlights. During the fiscal year, the Town revised the budget on several occasions.
Generally, budget amendments fall into one of three categories: (1) amendments made to adjust the estimates that
are used to prepare the original budget ordinance once exact information is available; (2) amendments made to
recognize new funding amounts from external sources, such as federal and state grants; and (3) increases in
appropriations that become necessary to maintain services.
Actual operating revenues for the General Fund were more than the budgeted amount by $854,703. Expenditures
were $1,395,213 less than budgeted, primarily due to the delaying of purchases and multiple long-term vacancies.
Proprietary funds. The Town's proprietary funds provide the same type of information found in the government -
wide statements, but in more detail. Unrestricted net position of the Water and Sewer Fund at the end of the fiscal
year amounted to $10,849,705, a 38.56% or $3,019,391 increase from the previous year. This increase is due to
the change in the net investment in capital assets (see Note 4.D). The total growth in net position was $3,034,754.
Unrestricted net position of the Stormwater Fund at the end of the fiscal year amounted to $594,582, a 24.29% or
$116,199 increase from the previous year. The increase is largely attributed to expenditures being 18.01% less
than expected. The total growth in net position was $1,991,133 due to the transfer of infrastructure from the general
fund.
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, 2019 totals $85,732,878 (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 ($251,568)
• Street resurfacing ($445,497)
Major developer -dedicated capital asset transactions during the year include the following:
• Cates Creek Sidewalk ($38,628)
• Empress Road ($337,524)
• Botan Way ($863,944)
• Aurora Way ($485,640)
11
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
• Fairy Moss Lane ($237,222)
• Papyrus Place ($630,671)
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
2019 2018 2019 2018
$ 4,634,594
49,297
$ 4,690,474
2,629,713
6,286,045 4,784,933
11,759,238
389,865
878,321
8,724,883
409,043
1,234,191
$ 6,132,444 $ 6,132,444
9,205,410 3,565,187
17,915,526 18, 383, 299
25,417,324 25,753,841
2,466,199 638,278
279,668 261,559
318,947 264,204
725
Total
2019 2018
$ 10,767,038 $ 10,822,918
9,254,707 6,194,900
24,201,571 23,168,232
25,417,324
14,225,437
669,533
1,197,268
25,753,841
9,363,161
670,602
1,498,395
725
Total $ 23,997,360 $ 22.473.237 $ 61,735,518 $ 54.999.537 $ 85,732,878 $ 77.472,774
Additional information on the Town's capital assets can be found in Note 4.A.5. of the basic financial statements.
Long-term debt. As of June 30, 2019, the Town of Hillsborough had outstanding bonded debt of $10,155,000,
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
2019 2018
$ - $
4,632,280
5,829,231
Business -Type
Activities
2019 2018
$ 15,397,010
10,155,000
970,330
552,936
$ 16,435,811
10,155,000
1,018,674
522,267
Total $ 4,632,280 $ 5.829,231 $ 27,075,276 $ 28,131,752
Total
2019
$ 15,397,010
10,155,000
970,330
5,185,216
$ 31,707,556
2018
$ 16,435,811
10,155,000
1,018,674
6,351,498
$ 33,960.983
The Town's total debt decreased by $2,253,427 during the current fiscal year, primarily due to repayments.
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 $82,476,174. The Town does not have any bonds authorized but unissued
at June 30, 2019.
Additional information regarding the Town's long-term debt can be found in Note 4.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 3.3% as of June 30, 2019 is below
the state average of 4.2%.
• No increase in property tax rate.
• No general obligation debt in the General Fund.
Budget highlights for the fiscal year ending June 30, 2020
Governmental activities: The property tax rate remains at 62 cents for FY20. This will be the seventh consecutive
year without a property tax rate increase. Expenses will decrease by 1.2% in FY20.
Other budget highlights in brief:
• Street resurfacing ($360,500)
• Police works relocation ($127,000)
• Fire protection increase ($42,905)
• Net salary adjustments resulting from an increase in the minimum wage to $15 and aligning
performance evaluations with the fiscal year ($138,000)
• Staff restructuring ($57,924)
Business -type activities:
Water and Sewer Fund
Due to the revenue bonds issue, both water and sewer rates will increase by 5%.
Operational expenditures in the Water/Sewer Fund are expected to decrease by 10.5% in FY20. Many cuts and
deferments were made to this year's budget to avoid a more significant rate increase and to limit additional fund
balance appropriations.
Other budget highlights in brief:
• West Fork Eno Reservoir Phase II expansion started in April 2018. The first series of
revenue bonds for this project were issued in May 2018. The second series will be issued
in the third quarter of FY20.
• Water system redundancy model ($40,000)
• Durham pump station generator ($110,000)
• Old water plant renovation ($50,000)
• McAdams Road water main replacement ($75,000)
13
Town of Hillsborough, North Carolina
Management's Discussion and Analysis
• Collection system rehabilitation ($220,000)
• River pump station rehabilitation ($30,000)
• Sewer line repairs ($70,000)
• Water and sewer fees rate study ($30,000)
Stormwater Fund
Stormwater rates will not increase, and expenses will decrease by 7.2% in FY20.
Other budget highlights in brief:
• Stormwater infrastructure ($172,500)
• Capital projects ($20,257)
Requests for information
This report is designed to provide an overview of the Town's finances. Questions concerning any of the information
found in this report or requests for additional information should be directed to the Director of Finance, Town of
Hillsborough, 137 North Churton Street, Post Office Box 429, Hillsborough, North Carolina 27278.
14
Basic Financial Statements
15
Town of Hillsborough, North Carolina
Statement of Net Position
June 30, 2019
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 $ 5,362,995 $ 12,523,596 $ 17,886,591 $ 262,242 $ 353,437
Receivables:
Taxes receivable, net 138,093 - 138,093
Accrued interest receivable,
property taxes 24,446 - 24,446 - -
Accounts receivable, net 76,381 1,565,531 1,641,912 368 292
Due from other governments 1,942,695 - 1,942,695 - -
Due from primary government - 931 55,486
Prepaid expenses 215 215 - 689
Restricted assets:
Cash and investments 1,526,561 6,288,234 7,814,795
Total current assets
9,071,171 20,377,576 29,448,747
263,541 409,904
Noncurrent assets:
Capital assets:
Land and construction -in -
progress 4,683,891 15,337,854 20,021,745
Other capital assets, net of
depreciation 19,313,469 46,397,664 65,711,133
Total capital assets 23,997,360 61,735,518 85,732,878
Total noncurrent assets 23,997,360 61,735,518 85,732,878
Total assets 33,068,531 82,113,094 115,181,625 263,541 409,904
DEFERRED OUTFLOWS OF
RESOURCES
Pension deferrals
OPEB deferrals
1,299,777
37,074
1,336,851
543,840 1,843,617
18,328 55,402
562,168 1,899,019
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 $ 317,315 $ 599,203 $ 916,518 $ 1,459 $ 15,486
Payable from restricted assets -
customer deposits 551,850 551,850
Accrued interest payable 57,634 174,812 232,446
Unearned revenue 27,381 - 27,381
Due to component units 82,418 82,418
Current portion of long-term
liabilities 944,693 1,325,220 2,269,913
Total current liabilities 1,429,441
2,651,085 4,080,526
Long-term liabilities:
Net pension liability 1,513,849 695,513 2,209,362
Total pension liability 727,333 727,333
Total OPEB liability 1,022,172 612,189 1,634,361
Due in more than one year 4,020,888 26,014,833 30,035,721
Total noncurrent liabilities 7,284,242 27,322,535 34,606,777
Total liabilities
DEFERRED INFLOWS OF
RESOURCES
Pension deferrals
OPEB deferrals
1,459 15,486
8,713,683 29,973,620 38,687,303 1,459 15,486
44,324
65,591
Total deferred inflows 109,915
5,429 49,753
37,159 102,750
42,588 152,503
NET POSITION
Net investment in capital assets 20,511,801 38,536,890 59,048,691
Restricted for:
Stabilization by state statute 3,377,165 3,377,165 1,299 55,778
Streets 75,919 75,919 -
Capital projects 303,921 - 303,921
Water and sewer projects 2,677,877 2,677,877
Unrestricted 1,312,978 11,444,287 12,757,265 260,783 338,640
Total net position $ 25,581,784 $ 52,659,054 $ 78,240,838 $ 262,082 $ 394,418
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 3o, 2019
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 $ 1,865,007 $ 158,451 $ 15,884 $ 2,593,628
Public safety 4,705,989 16,016 5,788 -
Transportation 718,593 730 199,965
Environmental protection 468,057 -
Economic and physical
development 488,592 29,000
Community activities and
projects 34,311 -
Parks and recreation 493,868 6,537 - 786,288
Interest on long-term obligations 140,004 -
Total governmental activities 8,914,421 210,734 221,637 3,379,916
Business -type activities:
Water and sewer 9,355,337 11,890,751
Stormwater 566,231 659,071 32,361
Total business -type
activities
9,921,568 12,549,822 32,361
Total primary government $ 18,835,989 $ 12,760,556 $ 253,998 $ 3,379,916
Component units
Hillsborough Tourism
Development Authority $ 59,824 $ $ $
Hillsborough Tourism Board 314,069 -
Total component units $ 373,893 $ - $ - $
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
Total
Tourism
Development Tourism
Authority Board
$ 902,956 $ $ 902,956 $ $ -
(4,684,185) - (4,684,185) -
(517,898) (517,898) -
(468,057) - (468,057) -
(459,592) - (459,592) -
(34,311) - (34,311) -
298,957 298,957 -
(140,004) (140,004) -
(5,102,134) - (5,102,134)
2,535,414 2,535,414
125,201 125,201
2,660,615 2,660,615
(5,102,134) 2,660,615 (2,441,519) -
(59,824)
(314,069)
(59,824) (314,069)
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 3o, 2019
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
Privilege licenses
Solid waste disposal
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
6,510,109 $ $ 6,510,109 $ - $
1,708,025 1,708,025 -
13,593 13,593 -
875 875 -
5,472 5,472
1,135,259 1,135,259
261,029 243,186 504,215 -
71,028 372,848
(32,615) (32,615) -
19,682 48,344 68,026 1,611
(2,073,742) 2,073,742
7,547,687 2,365,272 9,912,959 71,028 374,459
2,445,553 5,025,887 7,471,440 11,204 60,390
23,136,231 47,633,167 70,769,398 250,878 334,028
$ 25,581,784 $ 52,659,054 $ 78,240,838 $ 262,082 $ 394,418
The notes to the financial statements are an integral part of this statement. 21
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 30, 2019
Exhibit 3
(2 pages)
ASSETS
Cash and investments
Taxes receivable
Accounts receivable, net
Due from other governments
Due from other funds
Restricted assets
Cash and investments
Major Funds
Town Barn
Improvements Total Total
General Capital Project Nonmajor Governmental
Fund Fund Funds Funds
5,199,110 $
138,093
76,381
926,594
2,054,296
75,919
1,146,721
$ 163,885 $ 5,362,995
138,093
76,381
1,016,101 1,942,695
2,054,296
303,921 1,526,561
Total assets $ 8,470,393 $ 1,146,721 $ 1,483,907 $ 11,101,021
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued
liabilities 267,474 - $ 49,840 $ 317,314
Due to other funds - 1,080,562 973,734 2,054,296
Unearned revenue 27,381 - - 27,381
Due to component units 82,418 82,418
Total liabilities
377,273 1,080,562 1,023,574 2,481,409
DEFERRED INFLOWS OF RESOURCES 138,093 1,016,101 1,154,194
FUND BALANCES
Restricted for:
Stabilization by state statute 3,375,414
Streets 75,919
Capital projects
Committed for:
Capital projects
Assigned for:
Sidewalks 46,526
Affordable housing 308,094
Subsequent year's expenditures 346,733
Other 22,713
Unassigned 3,779,628
Total fund balances
Total liabilities, deferred
inflows of resources and
fund balances
66,159
1,751 3,377,165
75,919
303,921 303,921
162,134 228,293
46,526
308,094
346,733
22,713
(1,023,574) 2,756,054
7,955,027 66,159 (555,768) 7,465,418
$ 8,470,393 $ 1,146,721 $ 1,483,907 $ 11,101,021
The notes to the financial statements are an integral part of this statement. 22
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 30, 2019
Exhibit 3
(2 pages)
Amounts reported for governmental activities in the statement of net
position are different because:
Total fund balances, governmental funds
Capital assets used in governmental activities are not financial resources
and therefore not reported in the funds.
Deferred outflows of resources related to pensions and OPEB are not reported in the
funds
$ 7,465,418
23,997,360
1,336,851
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 24,446
Liabilities for earned revenues considered deferred inflows of resources in
the fund statements 1,154,194
Deferred inflows of resources related to pensions and OPEB are not reported in the
funds (109,915)
Some liabilities, including accrued interest and accrued claims and judgments, are not
due and payable in the current period, and therefore are not reported in the funds. (5,023,216)
Total pension liability (727,333)
Net pension liability (1,513,849)
Total OPEB liability (1,022,172)
Net position of governmental activities $ 25,581,784
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, 2019
Exhibit 4
(2 pages)
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 Downtown Improvements
Capital Project Fund
Transfer to Public Works Project Fund
Transfer to Riverwalk CMAQ Capital
Projects Fund
Transfer to General Capital Projects Fund
Transfer from General Fund
Total other financing sources (uses)
Net change in fund balances
Fund balances, beginning
Fund balances, ending
Major Funds
General
Fund
Town Barn
Improvements
Capital Project
Fund
$ 6,491,857 $
1,728,857
1,135,259
224,840
248,824
50,176
9,879,813
199,411
10,079,224
1,489,003
4,300,485
916,097
345,220
486,140
158,906
489,242
1,033,807
130,976
9,349,876
729,348
(76,814)
(79,182)
(43,420)
(20,000)
(219,416)
509,932
7,445,095
9,827
9,827
9,827
541,226
541,226
(531,399)
Total
Nonmajor
Funds
46,669
2,378
12,582
61,629
61,629
12,582
110,005
982,859
1,105,446
(1,043,817)
219,416
219,416
Total
Governmental
Funds
$ 6,491,857
1,728,857
1,135,259
271,509
261,029
12,582
50,176
9,951,269
199,411
10,150,680
2,042,811
4,300,485
916,097
345,220
596,145
158,906
1,472,101
1,033,807
130,976
10, 996, 548
(845,868)
(76,814)
(79,182)
(43,420)
(20,000)
219,416
(531,399) (824,401) (845,868)
597,558 268,633 8,311,286
$ 7,955,027 $ 66,159 $ (555,768) $ 7,465,418
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, 2019
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
Amounts reported for governmental activities in the statement of activities are
different because:
$ (845,868)
Governmental funds report capital outlays as expenditures. However, in the
statement of activities, the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
capital outlays ($2,202,180) exceeded depreciation ($974,619) in the current
period. 1,227,561
The net effect of transactions involving capital assets donated to the Town. 2,593,628
The effect of transfers related to Capital Assets and Debt (2,073,742)
Contributions to the pension plan in the current fiscal year are not included in the
statement of activities
Benefit payments paid and adminstrative expense for the LEOSSA are not included
in the statement of activities
Benefit payments paid and adminstrative expense for the OPEB are not included
in the statement of activities
328,044
33,238
32,621
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 12,884
Proceeds received from disposition/transfer of capital assets (27,326)
Loss on disposal/transfer of capital assets (32,615)
Change in deferred revenues related to grants receivable. 739,618
The repayment of the principal of long-term debt ($1,033,808) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position. 1,033,808
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 (9,028)
Compensated absences (7,797)
Pension expense (512,581)
OPEB expense (46,892)
Changes in net position of governmental activities $ 2,445,553
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 3o, 2019
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 to Downtown Improvements
Capital Project Fund
Transfer to Public Works Project Fund
Transfer to Riverwalk - CMAQ Fund
Transfer from 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
6,983,250
1,415,170
955,192
212,000
30,000
169,980
9,765,592
152,500
9,918,092
2,034,149
5,111,390
968,610
612,845
443,264
308,161
1,125, 061
200,000
10,803,480
(885,388)
885,388
Final
Budget
$ 6,347,146
1,427,156
974,192
202,464
30,000
44,152
9,025,110
294,000
9,319,110
2,143,943
5,249,196
1,106,124
558,945
545,139
324,459
793,019
24,264
10,745,089
(1,425,979)
(76,814)
(79,182)
(43,420)
(20,000)
(219,416)
1,645,395
Actual
$ 6,491,857
1,728,857
1,135,259
224,840
248,824
50,176
9,879,813
199,411
10,079,224
1,773,265
4,672,335
957,115
465,611
486,140
259,805
735,605
9,349,876
729,348
(76,814)
(79,182)
(43,420)
(20,000)
(219,416)
Variance
Positive
(Negative)
$ 144,711
301,701
161,067
22,376
218,824
6,024
854,703
(94,589)
760,114
370,678
576,861
149,009
93,334
58,999
64,654
57,414
24,264
1,395,213
2,155,327
(1,645,395)
509,932 $ 509,932
7,445,095
$ 7,955,027
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, 2019
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 Nonmajor
Water and Stormwater
Sewer Fund Fund
11,878,148 $ 645,448
1,530,387 35,144
215
6,288,234 -
19,696,984 680,592
15, 337, 854
44,522,730
59,860,584
59, 860, 584
79,557,568
502,475
16,661
519,136
564,869
551,850
174,812
1,325,220
2,616,751
642,633
577,994
26,009,963
27,230,590
29, 847, 341
5,094
34,731
39,825
36,661,956
1,874,934
1,874,934
1,874,934
2,555,526
41,365
1,667
43,032
Total
$ 12,523,596
1,565,531
215
6,288,234
20,377,576
15,337,854
46,397,664
61,735,518
61,735,518
82,113,094
543,840
18,328
562,168
34,334 599,203
551,850
174,812
1,325,220
34,334 2,651,085
52,880 695,513
34,195 612,189
4,870 26,014,833
91,945 27,322,535
126,279 29,973,620
335 5,429
2,428 37,159
2,763 42,588
1,874,934 38,536,890
2,677,877 2,677,877
10,849,705 594,582 11,444,287
$ 50,189,538 $ 2,469,516 $ 52,659,054
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 30, 2019
Exhibit 7
Major Nonmajor
Water and Stormwater
Sewer Fund Fund
Total
Operating revenues
Charges for services $ 9,384,221 650,296 $ 10,034,517
Other operating revenues 2,506,530 8,775 2,515,305
Total operating revenues 11,890,751
659,071 12,549,822
Operating expenses
Personnel services 2,684,446 247,255 2,931,701
Depreciation 1,645,208 54,970 1,700,178
Other current charges 4,192,855 264,006 4,456,861
Total operating expenses 8,522,509 566,231 9,088,740
Operating income 3,368,242
92,840 3,461,082
Nonoperating revenues (expenses)
Investment earnings 243,186 - 243,186
Amortization of premium on bonds payable 48,344 - 48,344
Gain on disposal of capital assets 32,361 - 32,361
Interest and fees (832,828) - (832,828)
Total nonoperating revenues (expenses)
(508,937) - (508,937)
Income before capital contributions and transfers 2,859,305
92,840 2,952,145
Capital contributions and transfers:
Transfers from General Fund 175,449 1,898,293 2,073,742
Total capital contributions and transfers
Change in net position
Net position, beginning of year
Net position end of year
175,449 1,898,293 2,073,742
3,034,754
47,154, 784
1,991,133 5,025,887
478,383 47,633,167
$ 50,189,538 $ 2,469,516 $ 52,659,054
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 3o, 2019
Exhibit 8
(2 pages)
Cash flows from operating activities
Cash received from customers
Cash paid for goods and services
Cash paid to or on behalf of employees for
services
Net cash provided by operating activities
Cash flows from capital and related financing
activities
Acquisition and construction of capital assets
Proceeds from sale of capital assets
Proceeds from issuance of long-term debt
Premium received on issuance of bonds
Principal paid on bonds, notes and installment
purchases
Payment of bond issuance costs
Interest paid on bonds and installment purchases
Net cash used by capital and related
financing activities
Cash flows from investing activities
Interest on investments
Net cash provided by investing activities
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
Cash and cash equivalents
Unrestricted
Restricted
Total cash and cash equivalents
Major
Water and
Sewer Fund
Nonmajor
Stormwater
Fund
Total
$ 11,764,062 $ 652,738 $ 12,416,800
(4,523,241) (339,603) (4,862,844)
(2,548,974) (175,783) (2,724,757)
4,691,847 137,352 4,829,199
(6,172,577)
37,279
(1,171,275)
(766,598)
(8,073,171)
243,186
243,186
(3,138,138)
21,304,520
(31,606)
(31,606)
105,746
539,702
(6,204,183)
37,279
(1,171,275)
(766,598)
(8,104,777)
243,186
243,186
(3,032,392)
21, 844, 222
$ 18,166,382 $ 645,448 $ 18,811,830
$ 11,878,148
6,288,234
$ 645,448 $ 12,523,596
6,288,234
$ 18,166,382 $ 645,448 $ 18,811,830
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, 2019
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 $ 3,368,242 $ 92,840 $ 3,461,082
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation 1,645,208 54,970 1,700,178
Provision for uncollectible accounts (21,265) - (21,265)
Changes in assets and liabilities:
Accounts receivable (105,465) (7,445) (112,910)
Prepaid expense - -
Deferred outflows of resources for pensions (185,158) (12,160) (197,318)
Deferred outflows of resources for OPEB 10,187 (1,667) 8,520
Accounts payable and accrued liabilities (350,302) (4,125) (354,427)
Deposits 45,433 45,433
OPEB liability 4,742 474 5,216
Net pension liability 237,775 15,616 253,391
Deferred inflows of resources for pensions (6,366) (719) (7,085)
Deferred inflows of resources for OPEB 9,344 935 10,279
Compensated absences payable 39,472 (1,367) 38,105
Net cash provided by operating activities $ 4,691,847 $ 137,352 $ 4,829,199
The notes to the financial statements are an integral part of this statement. 30
Town of Hillsborough, North Carolina
Statement of Fiduciary Net Position
Fiduciary Fund
Year Ended June 3o, 2019
Exhibit 9
Agency Fund
Special
Assessment Debt
ASSETS
Cash and investments $
LIABILITIES
Miscellaneous liabilities $
The notes to the financial statements are an integral part of this statement. 31
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32
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 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.
33
Town of Hillsborough, North Carolina
Notes to Financial Statements
Fund financial statements: The fund financial statements provide information about the Town's funds. Separate
statements for each fund category - governmental and proprietary - are presented. The emphasis of fund financial
statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining
governmental and enterprise funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated
with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up
essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from
nonexchange transactions or ancillary activities.
The Town's fiduciary fund is presented in the fund financial statements as an agency fund. Since by definition these
assets are being held for the benefit of a third party and cannot be used to address activities or obligations of the
government, these funds are not incorporated into the government -wide statements.
The Town reports the following major governmental funds:
General Fund. The General Fund is the general operating fund of the Town. It is used to account for all
financial resources except those required to be accounted for in another fund. The primary revenue sources
are ad valorem taxes, state grants, and various other taxes and licenses. The primary expenditures are for
general government administration, public safety, street maintenance and construction, and sanitation
services.
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.
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.
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.
34
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
Water and Sewer Capital Reserve Fund ("WS Capital Reserve Fund") have been consolidated with the
Water and Sewer Fund.
The Town reports the following nonmajor enterprise fund:
Stormwater Fund. This fund is used to account for the operations of the Town's stormwater management
department.
The Town reports the following fiduciary fund:
Special Assessment Debt Agency Fund. This fund is used to account for proceeds that the Town has
received from special assessments that have not been remitted to Regions Bank. Regions Bank is the
Trustee of the Series 2013 Special Revenue Bonds.
C. Measurement focus and basis of accounting
In accordance with North Carolina General Statutes, all funds of the Town are maintained during the year using the
modified accrual basis of accounting.
Government -wide and proprietary fund financial statements. The government -wide and proprietary fund
financial statements are reported using the economic resources measurement focus. The government -wide and
proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded
when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash
flows take place. Nonexchange transactions, in which the Town gives (or receives) value without directly receiving
(or giving) equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue
from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations
is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or
privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special
assessments. Internally dedicated resources are reported as general revenues rather than as program revenues.
Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund's principal ongoing operations. The principal operating revenues of the Town's enterprise funds are
charges to customers for sales and services. The Town also recognizes as operating revenue the portion of tap fees
intended to recover the cost of connecting new customers to the water and sewer system. Operating expenses for
enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets.
All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
Governmental fund financial statements. Governmental funds are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized
when measurable and available. Expenditures are recorded when the related fund liability is incurred, except for
principal and interest on general long-term debt, claims and judgments, and compensated absences, which are
recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are
reported as other financing sources.
35
Town of Hillsborough, North Carolina
Notes to Financial Statements
The Town considers all revenues available if they are collected within 90 days after year end, except for property
taxes. Ad valorem taxes receivable are not accrued as a revenue, because the amount is not susceptible to accrual.
At June 30, taxes receivable for property other than motor vehicles are materially past due and are not considered
to be an available resource to finance the operations of the subsequent year. Also, as of September 1, 2013, state
law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North
Carolina. Effective with this change in the law, the State of North Carolina is responsible for billing and collecting the
property taxes on registered motor vehicles on behalf of all municipalities and special tax districts. Property taxes
are due when vehicles are registered. The billed taxes are applicable to the fiscal year in which they are received.
Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited registration plates are shown
as a receivable in these financial statements and are offset by deferred inflows of resources.
Sales taxes and certain intergovernmental revenues, such as utilities franchise tax, collected and held by the state
at year end on behalf of the Town, are recognized as revenue. Sales taxes are considered a shared revenue for the
Town because the tax is levied by Orange County and then remitted to and distributed by the State.
Intergovernmental revenues and sales and services are not susceptible to accrual, because generally they are not
measurable until received in cash. Grant revenues that are unearned at year end are recorded as deferred inflows
of resources. Under the terms of grant agreements, the Town funds certain programs by a combination of specific
cost -reimbursement grants, categorical block grants and general revenues. Thus, when program expenses are
incurred, there are both restricted and unrestricted net position available to finance the program. It is the Town's
policy to first apply cost -reimbursement grant resources to such programs, followed by categorical block grants, and
then by general revenues.
D. Budgetary data
The Town's budgets are adopted by the governing board as required by the North Carolina General Statutes. An
annual budget is adopted for the General Fund, the Water and Sewer Fund, and the Stormwater Fund. All annual
appropriations lapse at the fiscal year end. Project ordinances are adopted for the Downtown Improvements Capital
Project Fund, Town Barn Improvements Capital Project Fund, Riverwalk CMAQ Capital Project Fund, Rail Station
Capital Project Fund, Public Works Building Capital Project Fund, General Capital Projects Fund, Water and Sewer
Capital Projects Fund, and the Water and Sewer Capital Reserve Fund. The water and sewer enterprise fund
projects and capital reserve are consolidated with the Water and Sewer Fund for reporting purposes. All budgets
are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at
the functional level for all annually budgeted funds and at the object level for the multiyear funds. The Town Manager
is authorized by the budget ordinance to transfer appropriations and may allow any amount of money to be
transferred between functional areas within a fund. The Town Manager is also authorized to effect interdepartmental
transfers within the same fund, not to exceed 10% of the appropriated monies for the department whose allocation
is reduced. The Finance Director may make minor adjustments to the budget without obtaining prior governing board
approval by formal budget amendment. Such changes must be within a fund and not between two or more funds.
The Finance Director is required to inform the board at the next meeting after the budget adjustment is made. Budget
amendments typically involve larger sums of money and require the governing board's approval. During the year,
several amendments to the original budget were necessary.
E. Assets, liabilities, deferred outflows/inflows of resources and fund equity
(1) Deposits and investments
All deposits of the Town are made in board -designated official depositories and are secured as required by state law
(G.S. 159-31). The Town may designate, as an official depository, any bank or savings association whose principal
office is located in North Carolina. Also, the Town may establish time deposit accounts such as NOW and SuperNOW
accounts, money market accounts, and certificates of deposit.
36
Town of Hillsborough, North Carolina
Notes to Financial Statements
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, 2019, the Term portfolio has a duration of .11 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.
(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 $ 75,919
Town Barn Improvements 1,146,721
General Capital Projects Fund 190,000
General Capital Reserve Fund
Developer donations - future capital projects 113,921
Total governmental activities 1,526,561
Business -type activities:
Water and Sewer Fund
Unspent debt proceeds 3,058,507
Customer deposits 551,850
Developer donations - perpetual maintenance 441,138
Developer donations - water and sewer needs 2,236,739
Total business -type activities 6,288,234
Total restricted cash $ 7.814,795
37
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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.
Minimum capitalization costs are as follows:
Cost
Land and easements $ 1
Buildings, improvements 10,000
Distribution system 15,000
Vehicles, furniture and equipment 5,000
Infrastructure 35,000
Donated capital assets received prior to July 1, 2015 are recorded at their estimated fair value at the date of donation.
Donated capital assets received after July 1, 2015 are recorded at acquisition value. All other purchased or
constructed assets are recorded at cost or estimated historical cost. The cost of normal maintenance and repairs
that do not add to the value of the asset or materially extend assets' lives are not capitalized.
Capital assets are depreciated using the straight-line method over their estimated useful lives:
Asset Class Estimated Useful Lives
Buildings and building improvements 30 years
Infrastructure 40 years
Plant and distribution systems 50 years
Furnishings, fixtures, equipment and computers 5 to 10 years
Vehicles 3 to 5 years
38
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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 2019 fiscal year, and OPEB deferrals for
the 2019 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, as
are premiums received on debt issuances, while discounts on debt issuances are reported as other financing uses.
Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
(10) Compensated absences
The vacation policy of the Town provides for the accumulation of up to 240 hours earned vacation leave, with such
leave being fully vested when earned. For the Town's government -wide and proprietary funds, an expense and a
liability for compensated absences and the salary -related payments are recorded as the leave is earned. The Town
has assumed a first -in, first -out method of using accumulated compensated time. The portion of that time that is
estimated to be used in the next fiscal year has been designated as a current liability and included in the long-term
liabilities due within one year on the government -wide financial statements.
The Town's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leave does not vest,
but any unused sick leave accumulated at the time of retirement may be used in determination of length of service
for retirement benefit purposes. Since the Town has no obligation for the accumulated sick leave until it is actually
taken, no accrual for sick leave has been made.
(11) Net position/fund balances
Net position
Net position in government -wide and proprietary fund financial statements is classified as net investment in capital
assets, restricted, and unrestricted. Restricted net position represent constraints on resources that are either
externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by
law through state statute.
Fund balances
In the governmental fund financial statements, fund balance is comprised of five classifications designed to disclose
the hierarchy of constraints placed on how the fund balance can be spent.
39
Town of Hillsborough, North Carolina
Notes to Financial Statements
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.
Committed for capital projects - Portion of fund balance that can only be used for the construction of capital
projects.
Assigned fund balance - Portion of fund balance the Town of Hillsborough intends to use for specific purposes that
are considered neither restricted nor committed. Unassigned fund balances may be assigned by the Town Board,
Town Manager, or Finance Director for specific purposes through the budget process or agenda items.
Assigned for sidewalks - Portion of fund balance that is to be used for the future construction of sidewalks.
Assigned for affordable housing - Portion of fund balance that is to be used for the future construction of
affordable housing.
Assigned for subsequent year's expenditures - Portion of fund balance that is appropriated in the next year's
budget that is not already classified in restricted or committed. The governing body approves the
appropriation.
40
Town of Hillsborough, North Carolina
Notes to Financial Statements
Assigned for other expenditures - Portion of fund balance that is to be used for future projects that relate to
various purposes for which the funds were received.
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 policy to maintain the General Fund fund balance level between 20% and
60% of operating expenditures, with a target of 33%, or the equivalent of four months of operating expenditures.
(12) Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the Local Governmental
Employee's Retirement System (LGERS) and additions to/deductions from LGERS' fiduciary net position have been
determined on the same basis as they are reported by LGERS. For this purpose, plan member contributions are
recognized in the period in which the contributions are due. The Town's employer contributions are recognized
when due and the Town has a legal requirement to provide the contributions. Benefits and refunds are recognized
when due and payable in accordance with the terms of LGERS. Investments are reported at fair value.
2. Reconciliation of GAAP and Budgetary -Basis Expenditures
The accompanying schedule reconciles certain General Fund transactions, which are treated differently on Exhibit 4
(GAAP basis) and Exhibit 5 (budgetary basis). These differences relate to 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
$ 1,489,003
4,300,485
916,097
345,220
158,906
489,242
1,033,807
130,976
Increase
(Decrease)
$ 284,262
371,850
41,018
120,391
100,899
246,363
(1,033,807) (1)
(130,976) (1)
Exhibit 5
$ 1,773,265
4,672,335
957,115
465,611
259,805
735,605
41
Town of Hillsborough, North Carolina
Notes to Financial Statements
3. Stewardship, Compliance and Accountability
A. Deficit in Fund Balance or Net Position of Individual Funds
As of June 30, 2019, the Downtown Improvements and Riverwalk CMAQ Capital Project Funds have deficit fund
balances of $199,307 and $824,267, respectively. These deficit fund balances result from grant revenues the Town
must recognize on these financial statements as deferred due to receipt not taking place within 90 of the fiscal year
end. These deficit fund balances will be eliminated when grant funds are received in the 2020 fiscal year.
4. Detail Notes on All Funds
A. Assets
(1) 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, 2019, the Town's deposits had a carrying amount of $8,256,695 and a bank balance of $8,805,852. Of
the bank balance, $759,827 was covered by federal depository insurance and $8,046,025 in interest -bearing
deposits were covered under the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2019.
At June 30, 2019, the Authority's deposits had a carrying amount and bank balance of $262,242. All of the bank
balance was covered by federal depository insurance.
At June 30, 2019, the Board's deposits had a carrying amount of $353,437 and a bank balance of $354,837. Of the
bank balance, $250,000 was covered by federal depository insurance, and $104,837 of demand deposits were
covered under the Pooling Method.
42
Town of Hillsborough, North Carolina
Notes to Financial Statements
Investments
At June 30, 2019, the Town's investment balances were as follows:
Investments by Type
Valuation Book
Measurement Value at
Method 6/30/2019 Maturity Rating
NC Capital Management Trust - Amortized
Government Portfolio Cost $ 14,084,359 N/A AAAm
NC Capital Management Trust - Term Fair Value
Portfolio Level 1 1,008,621 0.11 years Unrated
NC Capital Management Trust — Amortized
Government Portfolio - Capital Reserve Cost 2,236,739 N/A AAAm
NC Capital Management Trust —Government Amortized
Portfolio —General Fund Capital Reserve Cost 113,922 N/A AAAm
Total $ 17,443,641
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.
Level of fair value hierarchy:
Level 1 - Debt securities 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, 2019.
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 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 $ 476,968
Utilities franchise and telecommunications tax 150,704
Other government agencies 93,131
Sales tax refunds 205,791
926,594
Downtown Improvements Capital Project Fund
STP grant funds 235,794
Riverwalk CMAQ Capital Project Fund
CMAQ grant funds 780,307
$ 1.942,695
43
Town of Hillsborough, North Carolina
Notes to Financial Statements
(4) Receivables - allowance for doubtful accounts
The amounts presented in the Balance Sheet and the Statement of Net Position for the year ended June 30, 2019
are net of the following allowances for doubtful accounts, which are based on historical percentages of receivables
not expected to be collected.
General Fund:
Taxes receivable $ 49,317
Water and Sewer Enterprise Fund $ 42,927
(5) Capital assets
Governmental capital asset activity for the year ended June 30, 2019 was as follows:
Governmental activities:
Capital assets not
being depreciated:
Land
Construction -in -
progress
Total capital assets
not being depreciated
Beginning
Balances Increases Decreases
$ 4,690,474 $
Transfers
Ending
Balances
$ (55,880) $ $ 4,634,594
2,629,713 1,634,090 (3,875,914) (338,592) 49,297
7,320,187 $ 1,634,090 $ (3.,931,794) $_ 33_15.92) 592) 4,683,891
Capital assets being
depreciated:
Buildings and
improvements 6,990,652 $ 1,732,307 $ $ 8,722,959
Infrastructure 9,800,076 5,178,433 (2,133,177) 12,845,332
Equipment 891,873 69,601 (48,835) 38,835 951,474
Vehicles 4,353,814 52,991 (107,665) (20,762) 4,278,378
Total capital assets
being depreciated
22,036,415 $ 7.033.332 .$____(.15.6_,50Q) $ (2,115.104) 26,798,143
Less accumulated
depreciation for:
Buildings and
improvements 2,205,719 $ 231,195 $ $ 2,436,914
Infrastructure 1,075,193 245,784 (234,883) 1,086,094
Equipment 482,830 88,779 (48,835) 38,835 561,609
Vehicles 3,119,623 408,861 (107,665) (20,762) 3,400,057
Total accumulated
depreciation
Total capital assets
being depreciated, net
Governmental activity
capital assets, net
6,883,365 $ 974,619 $ (156,500) $ (216,810) 7,484,674
15,153, 050 19, 313,469
$ 22.473,237 $ 23,997,360
Depreciation expense was charged to functions/programs of the primary government as follows:
General government $ 227,186
Public safety 330,414
Transportation 274,667
44
Town of Hillsborough, North Carolina
Notes to Financial Statements
Economic and physical development 28,523
Environmental protection 113,829
$ 974,619
Business -type capital asset activity for the year ended June 30, 2019 was as follows:
Beginning
Balances
Increases
Ending
Decreases Transfers Balances
Business -type activities:
Capital assets not being
amortized or depreciated:
Land $ 6,132,444 $ $ - $ $ 6,132,444
Construction -in -progress 3,565,187 5,940,243 (300,020) 9,205,410
Total capital assets not
being amortized or
depreciated 9,697,631 $ 5,940,243 $ (300,020) $ 15,337,854
Capital assets being
amortized or depreciated:
Buildings and
improvements 27,771,418 $ $ - $ 338,592 28,110,010
Plant and distribution
systems 35,002,287 300,020 - 35,302,307
Infrastructure 739,873 - 2,133,177 2,873,050
Equipment 1,931,622 104,128 (331,301) (38,835) 1,665,614
Vehicles 891,870 160,020 (49,893) 20,762 1,022,759
Total capital assets being
amortized or depreciated 66,337,070 $ 564.168 $ (381.194) $ 2,453,696 68 973 740
Less accumulated
depreciation and
amortization for:
Buildings and
improvements 9,388,119 $ 806,365 $ $ 10,194,484
Plant and distribution
systems 9,248,446 636,537 9,884,983
Infrastructure 101,595 70,373 234,883 406,851
Equipment 1,669,338 86,544 (331,101) (38,835) 1,385,946
Vehicles 627,666 100,359 (44,975) 20,762 703,812
Total accumulated
depreciation and
amortization 21,035,164 $ 1.700,178 $ (376,076) $ 216,810 22,576,076
Depreciable assets, net
Business -type activity
capital assets, net
45,301,906 46,397,664
$ 54,999.537 $ 61.735.518
45
Town of Hillsborough, North Carolina
Notes to Financial Statements
(6) Construction commitments
The Town has active construction projects as of June 30, 2019 with the following remaining commitments:
B.
(1)
(a)
Project
West Fork Eno Reservoir
Total
Liabilities
Pension plans and postemployment obligations
Local Governmental Employees' Retirement System
Remaining
Spent to Date Commitment
$ 6,260,817 $ 608,820
$ 6 260 817 $ 608,820
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.
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, 2019 was 8.50% of compensation for law enforcement officers
and 7.75% 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 $478,756 for the year ended June 30, 2019.
46
Town of Hillsborough, North Carolina
Notes to Financial Statements
Refunds of contributions. Town employees who have terminated service as a contributing member of LGERS, may
file an application for a refund of their contributions. By state law, refunds to members with at least five years of
service include 4% interest. State law requires a 60 -day waiting period after service termination before the refund
may be paid. The acceptance of a refund payment cancels the individual's right to employer contributions or any
other benefit provided by LGERS.
Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources
related to pensions
At June 30, 2019, the Town reported a liability of $2,209,362 for its proportionate share of the net pension liability.
The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of December 31, 2017. The total pension liability was
then rolled forward to the measurement date of June 30, 2018 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, 2018, the Town's proportion was
0.09313%, which was an increase of 0.0012% from its proportion measured as of June 30, 2017.
For the year ended June 30, 2019, the Town recognized pension expense of $634,380. At June 30, 2019, 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
$ 340,852
586,279
303,280
18,400
478,756
Deferred
Inflows of
Resources
$ 11,437
5,806
$ t727,567 $ 17.243
$478,756 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,
2020. 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:
2020
2021
2022
2023
2024
Thereafter
$ 599,792
388,418
68,726
174,632
Actuarial assumptions. The total pension liability in the December 31, 2017 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
47
Town of Hillsborough, North Carolina
Notes to Financial Statements
The plan currently uses mortality tables that vary by age, gender, employee group (i.e., general, law enforcement
officer) and health status (i.e., disabled and healthy). The current mortality rates are based on published tables and
based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain a
provision to reflect future mortality improvements.
The actuarial assumptions used in the December 31, 2017 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
Long -Term
Expected
Target Real Rate
Allocation of Return
Fixed income 29.0% 1.4%
Global equity 42.0% 5.3%
Real estate 8.0% 4.3%
Alternatives 8.0% 8.9%
Credit 7.0% 6.0%
Inflation protection 6.0% 4.0%
Total 100.0%
The information above is based on 30 -year expectations developed with the consulting actuary for the 2017 asset,
liability, and investment policy study for the North Carolina Retirement Systems, including LGERS. The long-term
nominal rates of return underlying the real rates of return are arithmetic annualized figures. The real rates of return
are calculated from nominal rates by multiplicatively subtracting a long-term inflation assumption of 3.00%. All rates
of return and inflation are annualized.
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.
48
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 onepercentage point lower (6.00 percent) or one percentage point higher
(8.00 percent) than the current rate:
1%
Decrease
(6.00%)
Discount 1%
Rate Increase
(7.00%) (8.00%)
Town's proportionate share of the net pension
liability (asset) $ 5,307,079 $ 2,209,362 $ (379,139)
Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position is available
in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North Carolina.
(b) Law Enforcement Officers' Special Separation Allowance
Plan description. The Town of Hillsborough administers a public employee retirement system (the Separation
Allowance), a single -employer defined benefit pension plan that provides retirement benefits to the Town's qualified
sworn law enforcement officers under the age of 62 who have completed at least 30 years of creditable service or
have attained 55 years of age and have completed five or more years of creditable service. The Separation
Allowance is equal to 0.85 percent of the annual equivalent of the base rate of compensation most recently applicable
to the officer for each year of creditable service. The retirement benefits are not subject to any increases in salary
or retirement allowances that may be authorized by the General Assembly. Article 12D of G.S. Chapter 143 assigns
the authority to establish and amend benefit provisions to the North Carolina General Assembly.
All full-time law enforcement officers of the Town are covered by the Separation Allowance. At the December 31,
2017 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
Total
A separate report was not issued for the plan.
2
30
32
(ii) Summary of significant accounting policies
Basis of accounting. The Town has chosen to fund the Separation Allowance on a pay-as-you-go basis. Pension
expenditures are made from the General Fund, which is maintained on the modified accrual basis of accounting.
Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.
The Separation Allowance has no assets accumulated in a trust that meets the criteria which are outlined in GASB
Statement 73.
49
Town of Hillsborough, North Carolina
Notes to Financial Statements
(iii) Actuarial assumptions:
The entry age actuarial cost method was used in the December 31, 2017 valuation. The total pension liability in the
December 31, 2017 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 3.64 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, 2017.
Mortality rates are based on the RP -2014 series mortality tables with adjustments for mortality improvements based
on Scale AA.
(iv) Change in actuarial assumptions:
On the prior measurement date (December 31, 2017), the Municipal Bond Index Rate, on which the discount rate
is based, was 3.16%. Since the Prior Measurement Date, the Municipal Bond Index Rate has increased to 3.64%
as of the Measurement Date (December 31, 2018). This resulted in a $29,947 decrease 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 $20,169 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, 2019, the Town reported a total pension liability of $727,333. The total pension liability was measured
as of December 31, 2018 based on a December 31, 2017 actuarial valuation. The total pension liability was then
rolled forward to the measurement date of December 31, 2018 utilizing update procedures incorporating the
actuarial assumptions. For the year ended June 30, 2019, the Town recognized pension expense of $83,304.
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 66,921 $ 348
Changes of assumptions 30,739 32,161
Town benefit payments and plan administrative expense
made subsequent to the measurement date 18,390
Total $ 116,050 $ 32.509
50
Town of Hillsborough, North Carolina
Notes to Financial Statements
The $18,390 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 related to pensions will
be recognized in pension expense as follows:
Year Ending
June 30,
2020 $ 13,670
2021 13,670
2022 13,670
2023 15,134
2024 8,511
Thereafter 496
Total
$ 65,151
(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 3.64 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 (2.64 percent) or 1 -percentage -point higher (4.64 percent) than the current rate:
Total pension liability
1% Discount 1%
Decrease Rate Increase
(2.64%) (3.64%) (4.64%)
$ 791,178 $ 727.333 $ 668.937
2019
Beginning balance $ 641,574
Service cost 49,048
Interest on the total pension liability 19,749
Changes of benefit terms
Differences between expected and actual experience in the
measurement of the total pension liability 80,147
Changes of assumptions or other inputs (29,947)
Benefit payments (33,238)
Ending balance of the total pension liability $ 727,333
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.
51
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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 $ 634,380 $ 83,304 $ 717,684
Pension liability 2,209,362 727,333 2,936,695
Proportionate share of net pension liability 0.09313% N/A N/A
Deferred outflows of resources
Differences between expected and actual
experience $ 340,852 $ 66,921 $ 407,773
Changes of assumptions 586,279 30,739 617,018
Net difference between projected and actual
earnings on plan investments 303,280 - 303,280
Changes in proportion and differences
between contributions and proportionate
share of contributions 18,400 - 18,400
Benefit payments and administrative costs paid
subsequent to the measurement date 478,756 18,390 497,146
Deferred inflows of resources
Differences between expected and
actual experience 11,437 348 11,785
Changes in proportion and differences
between employer contributions and
proportionate share of contributions 5,806 - 5,806
Change of Assumptions - 32,161 32,161
(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, 2019 were $487,120, which
consisted of $297,170 from the Town and $189,950 from employees.
(2) Other postemployment benefit obligations
Plan description. According to a Town resolution, the Town administers a single -employer defined benefit
Healthcare Plan (the "HC Plan"). The HC Plan provides post -retirement healthcare benefits until they become
eligible for Medicare to retirees of the Town who were hired before February 9, 2009, who have at least 20 years
52
Town of Hillsborough, North Carolina
Notes to Financial Statements
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
Age 57 to 60
Age 60 until eligible for Medicare
Law Enforcement
Hired Before
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
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
Full coverage
paid for by Town
Full coverage
paid for by Town
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
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
Not eligible for
coverage
Full coverage
paid for by Town
Membership of the HC Plan consisted of the following at June 30, 2017, the date of the latest actuarial valuation:
Retirees and dependents receiving benefits
Active plan members
General
Employees
Law
Enforcement
Officers
3 2
65 26
Total 68 28
Total OPEB liability
The Town's total OPEB liability of $1,634,361 was measured as of June 30, 2018 and was determined by an
actuarial valuation as of June 30, 2017.
Actuarial assumptions and other inputs. The total OPEB liability in the June 30, 2018 actuarial valuation was
determined using the following actuarial assumptions and other inputs, applied to all periods included in the
measurement unless otherwise specified:
Inflation
Salary increases
Discount rate
Healthcare cost trend rates
2.50 percent, including real wage growth
3.50 to 7.75 percent, including inflation and productivity factor
3.89 percent
7.50% decreasing to an ultimate rate of 5.00% by 2023
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.
53
Town of Hillsborough, North Carolina
Notes to Financial Statements
Changes in the total OPEB liability
2018
Beginning balance $ 1,618,593
Service cost 56,731
Interest on the total OPEB liability 56,550
Changes of benefit terms
Differences between expected and actual experience in the
measurement of the total OPEB liability 8,747
Changes of assumptions or other inputs (45,522)
Benefit payments (60,738)
Ending balance of the total OPEB liability $ 1.634.361
Changes in assumptions and other inputs reflect a change in the discount rate from 3.56% to 3.89%.
Mortality rates were based on the RP -2014 mortality tables, with adjustments for LGERS 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, 2017 valuation were based on the results of an actuarial experience study for the period January 1,
2010 - December 31, 2014, adopted by the LGERS.
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, 2017 valuation were based on a review of recent plan experience
done concurrently with the June 30, 2017 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 (2.89 percent) or 1 percentage point higher (4.89 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(2.89%) (3.89%) (4.89%)
Total OPEB liability $ 1.776,315 $ 1.634,361 $ 1,504,181
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:
Current
1% Healthcare 1%
Decrease Trend Rate Increase
Total OPEB liability $ 1,458.642 $ 1.634,361 $ 1.837,672
54
Town of Hillsborough, North Carolina
Notes to Financial Statements
OPEB expense and deferred outflows of resources and deferred inflows of resources related to OPEB
For the year ended June 30, 2018, the Town recognized OPEB expense of $101,029. At June 30, 2019, the Town
reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following
sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 7,747 $ 1,593
Changes of assumptions - 101,157
Benefit payments and administrative costs made subsequent
to the measurement date 47,655 -
Total
$ 55,402 $ 102,750
$47,655 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, 2020. Other amounts reported as deferred inflows of resources
related to OPEB will be recognized in OPEB expense as follows:
Year Ending
June 30,
2020 $ (13,452)
2021 (13,452)
2022 (13,452)
2023 (13,452)
2024 (13,452)
Thereafter (27,743)
Total $ (95,003)
(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.
55
Town of Hillsborough, North Carolina
Notes to Financial Statements
(4) Accounts payable and accrued liabilities
Accounts payable and accrued liabilities at June 30, 2019 were as follows:
(5)
Payable to vendors and others
Accrued claims and judgments
Accrued payroll and related liabilities
Governmental
Activities
$ 207,578
109,737
Total accounts payable and accrued liabilities $ 317.315
Deferred outflows and inflows of resources
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 inflows of resources at year end is comprised of the following:
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
Business -
Type
Activities
Total
$ 542,707 $ 750,285
56,496 166,233
$ 599,203 $ 916,518
Deferred
Outflows
$ 478,756
18,390
47,655
415,520
18,400
617,018
303,280
$ 1,899,019
Statement of
Net Position
Governmental
Funds
Balance Sheet
- $ 138,093
1,016,101
133,319
5,806
13,378
Total $ 152,503 $ 1.154.194
56
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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 ($53,723,568); 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 ($751,424); 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.
(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. $ 326,933
57
Town of Hillsborough, North Carolina
Notes to Financial Statements
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%. $ 187,739
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%. 401,302
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. 359,803
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. 430,758
Note payable to BB&T, executed August 2014, in the amount of
$175,000 for the purchase of a document management system. The
note is payable in 10 semi-annual principal and interest payments
of $18,189 and matures in July 2019. Interest is payable at 1.5%
and the note payable is secured by the document management
system. 18,053
Note payable to BB&T, executed August 2014, in the amount of
$424,000 for the purchase of a garbage truck and a leaf truck. The
note is payable in 10 semi-annual principal and interest payments
of $44,068 and matures in July 2019. Interest is payable at 1.5%
and the note payable is secured by the trucks. 43,740
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. 148,269
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. 170,731
58
Town of Hillsborough, North Carolina
Notes to Financial Statements
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. $ 367,755
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. 2,177,197
Less current portion
4,632,280
(838,880)
$ 3,793,400
The future minimum payments on the notes payable as of June 30, 2019 are as follows:
Year Ending June 30, Principal
2020
2021
2022
2023
2024
2025 - 2029
2030 - 2033
Business -type activities:
$ 838,880
735,839
573,197
427,683
275,932
1,026,041
754,708
Interest
$ 128,485
109,958
92,943
79,528
68,927
236,062
66,781
Total
$ 967,364
845,796
666,140
507,212
344,859
1,262,103
821,490
$ 4.632.280 $ 782.684 $ 5,414.964
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
$ 127,387
425,549
552,936
(129,102)
$ 423.834
59
Town of Hillsborough, North Carolina
Notes to Financial Statements
The long-term debt requirements to maturity as of June 30, 2019 for the Enterprise Fund are as follows:
Year Ending June 30, Principal Interest Total
2020 $ 129,102 $ 17,435 $ 146,537
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 - 2029 153,324 42,300 195,624
2030 - 2033 143,504 12,995 156,499
$ 552,936 $ 124.736 $ 677,672
a. The provisions of this loan agreement contain certain financial covenants related to the maintenance of fund
balance. At June 30, 2019, the Town was in compliance with such covenants.
b. General obligation indebtedness
The Town's legal debt margin at June 30, 2019 was $82,476,174.
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, 2019 was $533,555.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2019 are as follows:
Business -Type Activities
Year Ending June 30,
Principal Interest
Total
2020 $ 76,222 $ 14,192 $ 90,414
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 - 2026 152,445 6,084 158,529
$ 533,555 $ 56,772 $ 590,327
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, 2019 was $13,357,505.
60
Town of Hillsborough, North Carolina
Notes to Financial Statements
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2019 are as follows:
Business -Type Activities
Year Ending June 30,
2020
2021
2022
2023
2024
2025 - 2029
2030 - 2034
Principal Interest
$ 890,500
890,500
890,500
890,500
890,500
4,452,500
4,452,505
$ 327,926
306,064
284,204
262,342
240,480
874,470
327,928
Total
$ 1,218,426
1,196, 564
1,174, 704
1,152, 842
1,130,980
5,326,970
4,780,433
$ 13,357,505 $ 2,623,414 $ 15,980,919
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, 2019 was
$1,505,950.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2019 are as follows:
Year Ending June 30,
2020
2021
2022
2023
2024
2025 - 2029
2030 - 2034
Business -Type Activities
Principal Interest Total
$ 94,122 $
94,122
94,122
94,122
94,122
470,610
564,730
94,122
94,122
94,122
94,122
94,122
470,610
564,730
$ 1,505,950 $ - $ 1,505,950
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, 2019.
Annual debt service requirements to maturity for these special revenue bonds payable as of June 30, 2019 are as
follows:
61
Town of Hillsborough, North Carolina
Notes to Financial Statements
Business -Type Activities
Year Ending June 30,
2020
2021
2022
2023
2024
2025 - 2029
2030 - 2034
2035 - 2039
2040 - 2043
Principal
25,000
25,000
30,000
30,000
170,000
2,450,000
3,770,000
3,655,000
Interest
$ 450,469
449,969
448,844
447,469
445,969
2,206,094
1,941,094
1,118, 594
258,966
Total
$ 450,469
474,969
473,844
477,469
475,969
2,376,094
4,391,094
4,888,594
3,913,966
$ 10,155,000 $ 7.767,468 $ 17,922,468
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. 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
Debt service, principal and interest (Revenue bond only)
Debt service coverage ratio on first -lien debt
Debt service all debt (total balance for 100%)
Debt service coverage ratio on all debt together
* System Fund Balance
e. Changes in long-term debt
Balance
July 1, 2018 Increases
Governmental activities:
Direct placement installment
purchases $
Compensated absences
Other postemployment
benefits
Net pension liability
(LGERS)
Total pension liability
(LEOSSA)
1,011,621
962,314
641,574
$ 8.770.244 $
5,829,231 $
11,890,751
(8,451,225)
3,439, 526
(580,221)
2,859,305
1,985,445
4,844,750
384,150
12.61
2,009,155
1.42
Balance
Decreases June 30, 2019
Current
Portion of
Long -Term
Liabilities
$ 1,196,951 $ 4,632,280 $ 838,880
325,504 113,610 105,813 333,301 105,813
10,551 1,022,172
551,535 1,513,849 -
85,759 727,333
761,455 $ 1.302.764 $ 8,228,935 $ 944,693
62
Town of Hillsborough, North Carolina
Notes to Financial Statements
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
522,266
16,435,812
10,155,000
1,018,674
606,973
$ 163,143
5,216
442,122 253,390
226,672 190,809
$ 132,473 $ 552,936
1,038,802 15,397,010
10,155, 000
48,344 970,330
612,189
$ 129,102
1,060,844
48,344
695,513
152,704 264,777 86,930
$ 29.407,519 $ 612.558 $ 1,372,323 $ 28,647,755 $ 1,325,220
Compensated absences, the total pension liability (LEOSSA), and net pension liability (LGERS) for governmental
activities have typically been liquidated in the General Fund.
f. 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, 2019, $2,385,000 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,
2020
2021
2022
72,484
71,284
141,306
Rent expense under operating leases for the year ended June 30, 2019 was $77,786.
C. Interfund balances and activity
Transfers to/from other funds
Transfers to/from other governmental funds at June 30, 2019 consist of the following:
From the General Fund to the Downtown Improvements Capital
Project Fund for design work $
From the General Fund to the Riverwalk CMAQ Capital Projects
Fund for grant matching funds
From the General Fund to the General Capital Projects Fund for
future connectivity projects
From the General Fund to the Public Works Project Fund
76,814
43,420
20,000
79,182
$ 219,416
63
Town of Hillsborough, North Carolina
Notes to Financial Statements
Transfers from the governmental fund to the proprietary funds at June 30, 2019 consist of the following:
From the General Fund to the Water and Sewer Fund to transfer their
portion of the Town Barn capital project $ 338,592
From the General Fund to the Storm Water fund for infrastructure - net
of depreciation 1,898,293
From the General Fund to the Water and Sewer Fund for their portion
Of the North Campus loan and related capital assets upon
Completion of the project (163,143)
$ 2,073,742
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
Governmental Business -Type
$ 23,997,360 $ 61,735,518
(4,632,280)
1,146,721
(552,936)
(15,397,010)
(10,155,000)
(152,189)
3,058,507
Net investment in capital assets $ 20.511.801 $ 38,536.890
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 $ 7,955,027
Less:
Prepaid items -
Stabilization by state statute 3,375,414
Streets - Powell Bill 75,919
Sidewalks 46,526
Affordable housing 308,094
Appropriated fund balance in subsequent fiscal year's budget 346,733
Other assignments 22,713
Working capital/fund balance policy 3,779,628
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.
General Fund
5. Jointly Governed Organization
Encumbrances
$ 318,143
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 $2,602 to the Council during the fiscal year ended June 30,
2019.
64
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
65
Town of Hillsborough, North Carolina
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Schedules of Changes in Total Pension Liability
Last Three Fiscal Years
Exhibit A
2019 2018 2017
Beginning balance $ 641,574 $ 566,336 $ 556,718
Service cost 49,048 37,358 36,956
Interest on the total pension liability 19,749 21,303 19,286
Changes of benefit terms - - -
Differences between expected and actual
experience in the measurement of the 80,147 (520)
total pension liability
Changes of assumptions or other inputs (29,947) 45,993 (13,621)
Benefit payments (33,238) (28,896) (33,003)
Other changes - -
Ending balance of the total pension liability $ 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.
66
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 Three Fiscal Years
Total pension liability
Covered payroll
Exhibit B
2019 2018 2017
$ 727,333 $ 641,574 $ 566,336
1,830,296 1,670,805 1,650,937
Total pension liability as a percentage of
covered payroll 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.
67
Town of Hillsborough, North Carolina
Schedule of Changes in the Total OPEB Liability and Related Ratios
Required Supplementary Information
June 3o, 2019
Last two fiscal years
Exhibit C
Total OPEB Liability 2019 2018
Service cost $ 56,731 $ 60,886
Interest 56,550 48,567
Changes of benefit terms -
Differences between expected and actual experience 8,747 (2,066)
Changes of assumptions or other inputs (45,522) (78,864)
Benefit payments (60,738) (46,470)
Net change in total OPEB liability 15,768 (17,947)
Total OPEB liability, beginning 1,618,593 1,636,540
Total OPEB liability, ending $ 1,634,361 $ 1,618,593
Covered -employee payroll $ 5,180,570 $ 5,180,570
Total OPEB liability as a percentage of covered -employee payroll
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
2019 3.89%
2018 3.56%
68
Town of Hillsborough, North Carolina
Schedules of Proportionate Share of Net Pension Liability (Asset)
Local Government Employees' Retirement System
Required Supplementary Information
Last Six Fiscal Years*
Exhibit D-1
Hillsborough's proportion of the net
pension liability (asset) (%)
2019 2018 2017 2016 2015
0.0931% 0.0919% 0.0924% 0.0838% 0.0809%
Hillsborough's proportion of the net
pension liability (asset) ($) $ 2,209,362 $ 1,404,436 $ 1,961,038 $ 376,224 $ (477,164)
Hillsborough's covered payroll
5,695,125 5,750,308 5,235,777 4,861,624 4,672,868
Hillsborough's proportionate share
of the net pension liability (asset)
as a percentage of its covered
payroll 38.79% 24.42% 37.45% 7.74% -10.21%
Plan fiduciary net position as a
percentage of the total pension
liability 91.63% 94.18% 91.47% 98.09% 102.64%
2014
Hillsborough's proportion of the net
pension liability (asset) (%) 0.0797%
Hillsborough's proportion of the net
pension liability (asset) ($) $ 960,691
Hillsborough's covered payroll 4,428,097
Hillsborough's proportionate share
of the net pension liability (asset)
as a percentage of its covered
payroll
Plan fiduciary net position as a
percentage of the total pension
liability
21.70%
94.35%
* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.
69
Town of Hillsborough, North Carolina
Schedules of Contributions
Local Government Employees' Retirement System
Required Supplementary Information
Last Six Fiscal Years
Exhibit D-2
2019
2018 2017 2016 2015
Contractually required contribution $ 478,756 $ 440,572 $ 429,432 $ 356,396 $ 357,402
Contributions in relation to the
contractually required contribution
Contribution deficiency (excess)
Hillsborough's covered payroll
Contributions as a percentage of
covered payroll
478,756 440,572 429,432 356,396 357,402
$ $ $ - $ $
$ 5,936,460 $ 5,695,125 $ 5,750,308 $ 5,235,777 $ 4,861,624
8.06% 7.74% 7.47% 6.81% 7.35%
2014
Contractually required contribution $ 333,343
Contributions in relation to the
contractually required contribution 333,343
Contribution deficiency (excess)
Hillsborough's covered payroll
Contributions as a percentage of
covered payroll
$
$ 4,672,868
7.13%
70
Supplementary Information
71
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts for
Year Ended June 3o, 2018
Schedule 1
(5 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Revenues
General revenues:
Ad valorem taxes:
Current $ 6,329,060 $ 6,472,975 $ 143,915 $ 6,669,987
Prior 86 86 481
Penalties and interest 18,000 18,796 796 31,380
6,347,146 6,491,857 144,711 6,701,848
Other taxes and licenses:
Local option sales tax 1,415,156 1,708,025 292,869 1,486,817
Gross receipts on short-term
rental property 8,000 13,593 5,593 9,657
Privilege licenses - 875 875 1,160
Motor vehicle license fees - 892 892 260
Solid waste disposal 4,000 5,472 1,472 4,465
1,427,156 1,728,857 301,701 1,502,359
Unrestricted intergovernmental
revenues:
Franchise tax 500,000 632,575 132,575 584,681
Beer and wine tax 27,000 31,819 4,819 29,106
Food and beverage tax 375,383 397,640 22,257 395,535
Occupancy tax 71,809 73,225 1,416 70,862
974,192 1,135,259 161,067 1,080,184
Restricted intergovernmental
revenues:
Powell Bill
Federal grants
State grants
Other
Investment earnings
Other general revenues
Total general revenues
199,964 199,965 1 189,743
21,710 21,710 8,852
- - 11,000
2,500 3,165 665 6,029
202,464 224,840 22,376 215,624
30,000 248,824
44,152 50,176
218,824 118,484
6,024 53,804
9,025,110 9,879,813 854,703 9,672,303
72
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2019 with Comparative Actual Amounts for
Year Ended June 30, 2018
Schedule 1
(5 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Functionally related revenues:
Use and rental fees:
Zoning permits $ 70,000 $ 95,363 $ 25,363 $ 127,308
Cable franchise 50,000 41,926 (8,074) 54,636
Time Warner Cable PEG fees 27,000 20,270 (6,730) 26,893
Fire inspection fees 10,000 12,852 2,852 13,909
Affordable Housing 137,000 29,000 (108,000) 360,440
Total functionally related
revenues
Total revenues
294,000 199,411 (94,589) 583,186
9,319,110 10,079,224
760,114 10,255,489
Expenditures
General government:
Governing body:
Personnel services 48,205 47,915
Other services and charges 180,976 215,891
Reimbursement from enterprise
funds (151,040) (133,607)
Capital outlay - -
139,422 78,141 61,281 130,199
Ruffin-Roulhac:
Other services and charges 95,627
Capital outlay
Debt Service Payments 200,171
Reimbursement from enterprise
funds (110,388)
Administration:
Personnel services
Other services and charges
Reimbursement from enterprise
funds
32,965
(20,296)
205,008 185,410 19,598 12,669
854,957
471,122
(756,289)
741,841
437,005
(603,246)
716,910 569,790 147,120 575,600
Finance:
Personnel services 472,654 473,506
Other services and charges 81,797 108,549
Debt service payments - 105,660
Reimbursement from enterprise
funds (314,641) (339,045)
288,700 239,810 48,890 348,670
73
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts for
Year Ended June 3o, 2018
Schedule 1
(5 pages)
Planning:
Personnel services
Other services and charges
2019 2018
Variance
Positive
Budget Actual (Negative)
$ 378,387
44,410
Actual
$ 337,864
56,577
448,028 422,797 25,231 394,441
Motor pool:
Personnel services 276,961 264,456
Other services and charges 149,084 186,495
Debt service payments 84,091 85,871
Reimbursement from enterprise
funds (232,819) (295,287)
Total general government
345,875 277,317 68,558 241,535
2,143,943 1,773,265 370,678 1,703,114
Public safety:
Police department:
Personnel services 2,616,169 2,601,203
Other services and charges 332,202 341,622
Capital outlay 67,651 436,967
Debt service payments 145,395 36,377
3,340,117 3,161,417
178,700 3,416,169
Fire inspections/code enforcement:
Personnel services 130,636 125,126
Other services and charges 10,965 9,120
Debt service payments 226,455 226,455
385,212 368,056 17,156 360,701
Safety:
Personnel services 105,904 100,052
Other services and charges 432,080 422,506
Capital outlay - 18,523
Reimbursement from enterprise
funds (476,329) (232,003)
Fire protection
Other services and charges
439,689 61,655
1,084,178
378,034 309,078
1,081,207 987,908
1,081,207 2,971 987,908
Total public safety 5,249,196 4,672,335 576,861 5,073,856
74
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts for
Year Ended June 3o, 2018
Schedule 1
(5 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Transportation:
Street department/Powell Bill:
Personnel services $ 277,642 $ 279,093
Other services and charges 161,914 184,766
Capital outlay 476,541 551,073
Debt service payments 41,018 45,562
1,106,124 957,115 149,009 1,060,494
Total transportation
1,106,124 957,115 149,009 1,060,494
Environmental protection:
Sanitation department:
Personnel services 197,024 222,475
Other services and charges 139,684 128,559
Capital outlay 134,276
Debt service payments 120,391 123,964
547,205 457,099 90,106 609,274
Cemetery:
Other services and charges
Total environmental
protection
8,512 10,038
11,740 8,512 3,228 10,038
558,945 465,611 93,334 619,312
Economic and physical development:
Tourism:
Personnel Services 33,911 29,238
Other services and charges 452,229 443,939
545,139 486,140 58,999 473,177
Total economic and physical
development
545,139 486,140 58,999 473,177
Community activities and projects:
Contributions - 5,000
Other services and charges 158,906 37,038
Debt service payments 100,899 525,645
Total community activities
and projects 324,459 259,805 64,654 567,683
75
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2019 with Comparative Actual Amounts for
Year Ended June 30, 2018
Schedule 1
(5 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Parks and recreation:
Personnel services $ 148,258 $ 117,990
Other services and charges 342,887 333,816
Debt service payments 246,363 251,585
Reimbursement from enterprise
funds (25,800) (24,082)
Capital Outlay 23,897
Total parks and recreation
Contingency:
Other services and charges
Total expenditures
Revenues over (under)
expenditures
Other financing sources (uses):
Transfer to other funds:
General Capital Projects Fund
Downtown Improvements Capital
Project Fund
Rail Station Capital Project Fund
Riverwalk - CMAQ Fund
Public Works Project Fund
Transfer from other funds:
General Capital Reserve Fund
Installment purchase obligations
issued
Sale of capital assets
793,019 735,605 57,414 679,309
24,264 24,264
10,745,089 9,349,876
1,395,213 10,176,945
(1,425,979) 729,348 2,155,327 78,544
(20,000) (20,000) (169,050)
(76,814) (76,814) - (41,500)
(5,000)
(43,420) (43,420) (24,450)
(79,182) (79,182)
104,808
948,441
43,670
Total other financing sources
(uses) (219,416) (219,416) - 856,919
Appropriated fund balance 1,645,395 (1,645,395)
Net change in fund balance 509,932 $ 509,932 935,463
Fund balance, beginning 7,445,095 6,509,632
Fund balance, ending $ 7,955,027 $ 7,445,095
76
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 3o, 2019
Schedule 2
Revenues
Investment earnings
Total revenues
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
$ 9,233 $ $ 9,827 $ 9,827 $ 594
9,233 9,827 9,827 594
Expenditures
Design 144,510 140,225 3,957 144,182
Construction 1,596,709 1,200,105 396,604 1,596,709
Miscellaneous capital items 334,307 193,642 140,665 334,307
Total expenditures
Revenues
under expenditures
Other financing sources (uses)
Installment purchase
obligations issued
Transfer from General Fund
Transfer to General Fund
Total other financing
sources (uses)
Net change in fund
balance
328
2,075,526 1,533,972 541,226 2,075,198 328
(2,066,293) (1,533,972) (531,399) (2,065,371) 922
1,997, 329
134,201
(65,237)
1,997,329
134,201
1,997, 329
134,201
65,237
2,066,293 2,131,530 - 2,131,530 65,237
$ $ 597,558 (531,399) $ 66,159 $ 66,159
Fund balance, beginning 597,558
Fund balance, ending $ 66,159
77
Town of Hillsborough, North Carolina
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2019
Schedule 3
(2 pages)
ASSETS
Cash and investments
Due from other governments
Restricted assets:
Cash and investments
Total assets
Consolidated Downtown Riverwalk
General Improvements CMAQ
Capital Capital Capital
Projects Projects Project
Fund Fund Fund
$
303,921
235,794 780,307
$ 303,921 $ 235,794 $ 780,307
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities - 49,840
Due to other funds - 199,307 774,427
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue
Total deferred inflows
of resources
Fund balances:
Restricted for:
Stabilization by state statute
Capital projects 303,921
Committed for:
Capital projects
Unassigned - (199,307) (824,267)
Total fund balances (deficit) 303,921 (199,307) (824,267)
199,307 824,267
235,794 780,307
235,794 780,307
Total liabilities, deferred inflows of
resources, and fund balances $ 303,921 $ 235,794 $ 780,307
78
Schedule 3
(2 pages)
Public Works
Rail Station Building Total
Capital Capital Nonmajor
Project Project Governmental
Fund Fund Funds
$ 35,685 $ 128,200 $ 163,885
-
- 1,016,101
- - 303,921
$ 35,685 $ 128,200 $ 1,483,907
- 49,840
- - 973,734
- - 1,023,574
1,016,101
1,016,101
551 1,200 1,751
- 303,921
35,134 127,000 162,134
- - (1,023,574)
35,685
128,200 (555,768)
$ 35,685 $ 128,200 $ 1,483,907
79
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, 2019
Schedule 4
(2 pages)
Revenues
Restricted intergovernmental
revenues:
Federal grants
Contributions from property owners
Investment earnings
Total revenues
Expenditures
Current:
General government
Economic and physical development
Parks and recreation
Consolidated Downtown Riverwalk
General Improvements CMAQ
Capital Capital Capital
Projects Project Project
Fund Fund Fund
12,582
2,378
$ 46,669
14,960 - 46,669
12,582
Total expenditures 12,582
100,555
982,859
100,555 982,859
Revenues over (under)
expenditures 2,378 (100,555) (936,190)
Other financing sources
Transfer from General Fund 20,000
76,814 43,420
Total other financing sources 20,000 76,814 43,420
Net change in fund balances 22,378 (23,741) (892,770)
Fund balances (deficit), beginning 281,543 (175,566) 68,503
Fund balances (deficit), ending $ 303,921 $ (199,307) $ (824,267)
80
Schedule 4
(2 pages)
Public Works
Rail Station Building Total
Capital Capital Nonmajor
Project Project Governmental
Fund Fund Funds
$ - $ - $ 46,669
- - 12,582
- 2,378
61,629
9,450
12,582
110,005
982,859
9,450 - 1,105,446
(9,450) - (1,043,817)
(9,450)
45,135
79,182 219,416
79,182 219,416
79,182 (824,401)
49,018 268,633
$ 35,685 $ 128,200 $ (555,768)
81
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 3o, 2019
Schedule 5
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects To Date (Negative)
Revenues
Contributions from property
owners $ 4,600,000 $ 3,193,273 $ 12,582 $ 3,205,855 $ (1,394,145)
Investment earnings 107 107 - (107)
Total revenues
4,600,107 3,193,380 12,582 (107) 3,205,855 (1,394,145)
Expenditures
Capital equipment 1,391,992 1,391,992 (1,391,992) - -
Fleet maintenance facility 1,117,257 1,117,257 (1,117,257) -
Garbage truck 224,512 224,512 (224,512) -
Municipal operations site 655,623 655,622 (655,622) - 1
Connectivity projects 40,000 40,000
Fiber loop 150,000 - - 150,000
Construction 4,600,000 3,193,274 12,582 3,205,856 1,394,144
Total expenditures 8,179,384 6,582,657 12,582 (3,389,383) 3,205,856 1,584,145
Revenues under
expenditures (3,579,277) (3,389,277) 3,389,276 (1) 190,000
Other financing sources
(uses):
Installment purchase
obligations issued 3,319,650 3,319,650 (3,319,650) -
Transfer from General Fund 266,697 246,697 20,000 (69,626) 197,071
Transfer to General Fund (7,070) (7,070) (7,070)
Total other financing
sources, 3,579,277 3,559,277 20,000 (3,389,276) 190,001
Net change in fund
balance $ - $ 170,000 20,000 $ $ 190,000 $ 190,000
Fund balance, beginning 170,000
Fund balance, ending 190,000
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 2,378
Transfers out - Capital Reserve Fund -
Fund balance, beginning (Capital Reserve Fund) 111,543
Fund balance, ending (Consolidated General
Capital Projects Fund) $ 303,921
82
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, 2019
Schedule 6
Revenues
Capital contributions
Interest on investments
Total revenues
Expenditures
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
1,491,440 $ 1,105,000 $
15,065 18,597
2,378
$ 1,105,000 $ (386,440)
20,975 5,910
1,506,505 1,123,597 2,378 1,125,975 (380,530)
494,450 - 494,450
Revenues over
expenditures 1,012,055 1,123,597
2,378
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
1,125,975
(609,023)
(403,031)
113,920
1
(1,012,055) (1,012,054) (1,012,054) 1
$ - $ 111,543 2,378 $ 113,921 $ 113,921
Fund balance, beginning 111,543
Fund balance, ending $ 113,921
83
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, 2019
Schedule 7
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants $ 365,000 $ 365,000 $ $ 365,000 $
Federal grants 366,000 120,946 120,946
Total revenues
(245,054)
731,000 485,946 485,946 (245,054)
Expenditures
Design 3,173 3,172 1 3,173 -
Construction 900,284 759,877 100,554 860,431 39,853
Administration 111,093 105,200 - 105,200 5,893
Total expenditures 1,014,550 868,249 100,555 968,804 45,746
Revenues
under expenditures
(283,550) (382,303) (100,555) (482,858) (199,308)
Other financing sources
Transfer from General Fund 283,550 206,737 76,814 283,551 1
Net change in fund
balance $ $ (175,566) (23,741) $ (199,307) $ (199,307)
Fund deficit, beginning (175,566)
Fund deficit,
ending
$ (199,307)
84
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, 2019
Schedule 8
Revenues
Restricted intergovernmental
revenues:
Federal grants
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
$ 1,006,850 $ 98,198 $ 46,669 $ 144,867 $ (861,983)
Total revenues 1,006,850
98,198 46,669 144,867 (861,983)
Expenditures
Design 131,778 131,778 - 131,778
Construction 970,897 53,198 886,792 939,990
Administration 105,545 2,669 96,067 98,736
Total expenditures
Revenues
under expenditures
Other financing sources
Transfer from General Fund
30,907
6,809
1,208,220 187,645 982,859 1,170,504 37,716
(201,370) (89,447) (936,190) (1,025,637) (824,267)
201,370 157,950 43,420 201,370
Net change in fund
balance $ $ 68,503 (892,770) $ (824,267) $ (824,267)
Fund balance, beginning 68,503
Fund deficit, ending $ (824,267)
85
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, 2019
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
Legal 10,000
Miscellaneous 144,000
Total expenditures 1,045,000
Revenues
under expenditures
Other financing sources
Transfer from General Fund
Net change in fund
balance
13,865
- 13,865 877,135
9,450 9,450 550
- - 144,000
13,865 9,450 23,315 1,021,685
(59,000) (13,865) (9,450) (23,315) 35,685
59,000 59,000 59,000
$ - $ 45,135 (9,450) $ 35,685 $ 35,685
Fund balance, beginning 45,135
Fund balance, ending $ 35,685
86
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 3o, 2019
Schedule 10
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design $ 75,000
Construction 79,182
Total expenditures
Revenues
under expenditures
Other financing sources
Transfer from General Fund
25,982 $
$ 25,982 $ 49,018
79,182
154,182 25,982 - 25,982 128,200
(154,182) (25,982)
(25,982) 128,200
154,182 75,000 79,182 154,182
154,182 75,000
79,182 154,182
Net change in fund
balance $ $ 49,018 79,182 $ 128,200 $ 128,200
Fund balance, beginning 49,018
Fund balance, ending $ 128,200
87
Town of Hillsborough, North Carolina
Schedule of Revenues
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2019 with Comparative Actual Amounts
for Year Ended June 30, 2018
Schedule ii
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Revenues
Operating revenues:
Water charges $ 4,350,000 $ 4,610,474 $ 260,474 $ 4,092,154
Sewer charges 4,360,000 4,773,747 413,747 4,428,334
Other receipts 2,326,818 2,506,530 179,712 1,744,469
11,036,818 11,890,751 853,933 10,264, 957
Nonoperating revenues:
Interest on investments 10,000 29,325 19,325 15,745
Total revenues $ 11,046,818 $ 11,920,076 $ 873,258 $ 10,280,702
88
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts
for Year Ended June 3o, 2018
Schedule 12
(3 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Expenditures
Engineering:
Personnel services $ 298,807 $ 300,579
Other services and charges 2,142,364 1,678,247
Capital outlay 6,725 -
Total engineering $ 2,827,713 2,447,896 $ 379,817 1,978,826
Billing and collection:
Personnel services 258,624 268,690
Other services and charges 516,029 418,495
Repairs and maintenance - 245
Capital outlay 28,892
Debt service payments 39,125 1,270,205
Total billing and
collection 956,714 842,670 114,044 1,957,635
Water plant:
Personnel services 606,122 582,644
Other services and charges 298,150 280,721
Repairs and maintenance 67,650 35,610
Capital outlay 31,762
Debt service payments 106,715 109,051
Total water plant 1,316,414 1,078,637 237,777 1,039,788
Water distribution:
Personnel services 471,883 420,977
Other services and charges 243,742 254,334
Repairs and maintenance 49,064 5,314
Capital outlay 83,465 175,124
Debt service payments 94,036 123,903
Total water distribution 1,114,857 942,190 172,667 979,652
Wastewater collection:
Personnel services 462,248 415,539
Other services and charges 295,777 279,854
Repairs and maintenance 39,661 34,158
Capital outlay 94,490 174,713
Debt service payments 73,558 75,150
Total wastewater
collection 1,441,802 965,734 476,068 979,414
89
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts
for Year Ended June 3o, 2018
Schedule 12
(3 pages)
2019 2018
Variance
Positive
Budget Actual (Negative)
Actual
Wastewater plant:
Personnel services 476,767 466,381
Other services and charges 313,611 314,788
Repairs and maintenance 207,344 167,736
Capital outlay 18,766 28,232
Debt service payments 1,240,289 1,262,151
Total wastewater plant 2,425,035 2,256,777 $ 168,258 2,239,288
Reservoir:
Other services and charges 21,622 23,985
Repairs and maintenance 10,000 13,400
Debt service payments 384,150 970,558
Total reservoir 636,989 415,772 221,217 1,007,943
Total expenditures
10,719,524 8,949,676
1,769,848 10,182,546
Revenues over (under)
expenditures 327,294 2,970,400 2,643,106 98,156
Other financing sources (uses)
Transfer to Water and Sewer
Capital Reserve Fund
Transfer to Water and Sewer
Capital Projects Fund
Transfer from Water and
Sewer Capital Projects Fund
Transfer from Water and
Sewer Capital Reserve Fund
Installment purchase
obligations issued
Insurance proceeds
Sale of capital assets
Total other financing
sources (uses)
(2,176,594) (2,176,594)
(810,000) (810,000)
466,470 466,470
37,279
(2,520,124) (2,482,845)
37,279
(1,349,656)
(552,488)
2,815,211
1,560,473
289,752
19,762
37,279 2,783,054
Excess of revenues and
other financing sources
(uses) over (under)
expenditures and other
uses (2,192,830) 487,555 2,680,385 2,881,210
Appropriated fund balance
2,192,830 (2,192, 830)
Excess of revenues and
other uses over
expenditures and other
uses $ - $ 487,555 $ 487,555 $ 2,881,210
90
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non-GAAP)
Water and Sewer Fund
Enterprise Fund
Year Ended June 3o, 2019 with Comparative Actual Amounts
for Year Ended June 30, 2018
Schedule 12
(3 pages)
Reconciliation of budgetary basis (modified accrual) to full accrual
basis
Excess of revenues and other sources over expenditures and other uses $ 487,555
Reconciling items:
Interest income from Water and Sewer Capital Projects Fund 167,154
Interest income from Water and Sewer Capital Reserve Fund 46,707
Payment of principal on notes, bonds and installment purchases 1,171,275
Decrease in deferred outflows of resources - pensions 185,158
Decrease in net pension liability (237,775)
Decrease in deferred inflows of resources - pensions 6,366
Increase in deferred outflows of resources - OPEB (10,187)
Decrease in total OPEB liability (4,742)
Increase in deferred inflows of resources - OPEB (9,344)
Capital outlay 232,338
Depreciation (1,645,208)
Gain on disposal of capital assets 32,361
Insurance Proceeds (37,279)
Interest expense accrual adjustment (66,230)
Vacation pay accrual adjustment (39,472)
Amortization of premium on bonds payable 48,344
Transfer from General Fund 175,449
Other receipts - capital project fund 12,160
Transfer to Water and Sewer Capital Projects Fund 810,000
Transfer from Water and Sewer Capital Reserve Fund (466,470)
Transfer to Water and Sewer Capital Reserve Fund 2,176,594
Change in net position $ 3,034,754
91
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 30, 2019
Schedule 13
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects to Date (Negative)
Revenues
Interest on investments $ 2,271 $ 5,734 $ 167,154 $ - $ 172,888 $ 170,617
Other receipts - 17,748 12,160 (17,748) 12,160 12,160
Total revenues 2,271 23,482 179,314 (17,748) 185,048 182,777
Expenditures
Capital improvements:
EDD water line extension 250,000 - - 250,000
Churton St Main Replacement 430,000 - - 430,000
Orange Gr/Churton sewer proj 40,000 295 - 295 39,705
16" Water connection
under 1-40 100,000 27,367 27,367 72,633
Booster pump station 182,387 11,666 - - 11,666 170,721
Waterstonewatertank 1,971,370 1,912,269 (1,912,269) - 1,971,370
Water meter replacement
Automatic meter reading
project
Effluent aeration 585,000 526,170 - (526,170) - 585,000
Churton Street Sewer 500,000 16,745 41,838 58,583 441,417
Other improvements - - - -
4,058,757 2,466,850 69,500 (2,438,439) 97,911 3,960,846
West Fork Eno Reservoir:
Design 2,698,521 1,643,339 149,425 1,792,764 905,757
Construction 10,667,714 1,921,279 5,721,316 - 7,642,595 3,025,119
Land acquisition 55,556 42,304 - - 42,304 13,252
13,421,791 3,606,922 5,870,741 - 9,477,663 3,944,128
Total expenditures 17,480,548 6,073,772 5,940,241 (2,438,439) 9,575,574 7,904,974
Revenues over (under)
expenditures (17,478,277) (6,050,290) (5,760,927) 2,420,691 (9,390,526) 8,087,751
Other financing sources (uses)
Proceeds from installment
purchases 13,056,112 12,037,438 (1,882,438) 10,155,000 (2,901,112)
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 4,596,380 3,799,763 810,000 (469,742) 4,140,021 (456,359)
Transfer to Water and Sewer
Fund (174,215) (2,194,247) (68,511) (2,262,758) (2,088,543)
Total other financing
sources 17,478,277 14,668,800 810,000 (2,420,691) 13,058,109 (4,420,168)
Excess of revenues and
other sources over
expenditures and other
financing uses
$
$ 8,618,510 $ (4,950,927) $ - $ 3,667,583 $ 3,667,583
92
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 30, 2019
Schedule 14
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments $ 300,868 $ 303,952 $ 46,707 $ 350,659 $ 49,791
Expenditures
Capital improvements- water
Capital improvements- sewer
Capital improvements- water tower
Revenues over (under)
expenditures
1,900,432
2,964,453
101,253
4,966,138 - - 4,966,138
1,900,432
2,964,453
101,253
(4,665,270) 303,952 46,707 350,659 5,015,929
Other financing sources (uses)
Transfers from Water and
Sewer Fund 12,261,329 10,084,735 2,176,594 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 (7,765,727) (7,299,257) (466,470) (7,765,727)
Transfers to Water and Sewer
Capital Projects Fund (1,299,553) (1,299,553) - (1,299,553)
Total other financing
sources 4,665,270 2,955,146 1,710,124 4,665,270
Excess of revenues and
other sources over
(under) expenditures $ - $ 3,259,098 $ 1,756,831 $ 5,015,929 $ 5,015,929
93
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, 2019
Schedule 15
Variance
Favorable
Budget Actual (Unfavorable)
Revenues
Operating revenues:
Stormwater charges $ 646,000 $ 650,296 $ 4,296
Other operating revenues 14,607 8,775 (5,832)
Total revenues 660,607
659,071 (1,536)
Expenditures
Operating expenditures:
Personnel services 246,143
Other services and charges 184,673
Repairs and maintenance 79,333
Capital outlay 31,606
Total expenditures 660,607
Revenues over
expenditures
$
541,755 118,852
117,316 $ 117,316
Reconciliation of modified accrual
basis to full accrual basis:
Capital outlay 31,606
Depreciation expense (54,970)
Decrease in accrued vacation pay 1,367
Increase in net pension liability (15,616)
Increase in total OPEB liability (474)
Increase in deferred outflows of
resources - pensions 12,160
Increase in deferred outflows of
resources - OPEB 1,667
Decrease in deferred inflows of
resources - pensions 719
Increase in deferred inflows of
resources - OPEB (935)
Transfer from General Fund 1,898,293
Change in net position $ 1,991,133
94
Town of Hillsborough, North Carolina
Schedule of Changes in Assets and Liabilities
Special Assessment Debt Agency Fund
Fiduciary Fund
Year Ended June 3o, 2019
Schedule 16
Beginning Ending
Balance Additions Deductions Balance
ASSETS
Cash $ - 1,241,599 (1,241,599) $ -
LIABILITIES
Due to others $ - $ 1,241,599 $ (1,241,599) $ -
95
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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, 2019
Schedule 17
Fiscal Year
Uncollected
Balance
July 1, 2018
Additions
Uncollected
Collections Balance
and Credits June 30, 2019
2018-2019 $ $ 6,952,134 $ 6,899,076 $ 53,058
2017-2018 58,229 - 21,157 37,072
2016-2017 27,386 9,197 18,189
2015-2016 20,873 6,088 14,785
2014-2015 14,954 3,610 11,344
2013-2014 15,327 - 1,198 14,129
2012-2013 14,596 540 14,056
2011-2012 9,206 - 943 8,263
2010-2011 9,805 (692) 10,497
2009-2010 7,874 1,857 6,017
2008-2009 5,592 5,592 -
183,842 $ 6,952,134 $ 6,948,566
Less allowance for
uncollectible
accounts:
General Fund
187,410
(49,317)
$ 138,093
Reconciliation of collections and credits with revenues:
Ad valorem taxes - General Fund $ 6,491,857
Amount written off for tax year 2008-2009 5,592
Penalties and interest (18,796)
Adjustments and refunds* 469,913
*Large refund due to one taxpayer the County determined had been overbilled.
$ 6,948,566
98
Town of Hillsborough, North Carolina
Analysis of Current Tax Levy
Year Ended June 30, 2019
Schedule i8
Original levy:
Property taxed at
current year's rate
Motor vehicle license
fees, tax and tag
Penalties and interest
Total property
valuation
Town -Wide
Property
Valuation**
Rate
Total Levy
Property
Excluding
Registered Registered
Total Motor Motor
Levy* Vehicles Vehicles
$ 1,088,855,671 0.6200 $ 6,237,192 $ 6,237,192 $
$ 1,088,855,671
714,942 714,942
6,952,134 6,237,192 714,942
Releases and abatements
Net levy 6,952,134 6,237,192 714,942
Uncollected taxes at
June 30, 2019 53,058 53,058
Current year's
taxes collected $ 6,899,076 $ 6,184,134 $ 714,942
Current levy
collection
percentage 99.24% 99.15% 100.00%
* Total adjusted levy includes discoveries and abatements.
** Property tax valuation prior to the discoveries and abatements.
99
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100
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.
101
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102
Financial Trends Information
103
Town of Hillsborough, North Carolina
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
2010 2011 2012 2013
Governmental activities:
Net investment in capital
assets $ 3,268,065 $ 5,338,508 $ 5,870,981 $ 6,723,808
Restricted 806,780 2,121,546 1,570,832 1,831,742
Unrestricted 5,402,272 3,766,961 3,984,264 4,390,314
Total governmental
activities net position $ 9,477,117 $ 11,227,015 $ 11,426,077 $ 12,945,864
Business -type activities
Net investment in capital
assets $ 21,736,659 $ 24,316,110 $ 26,632,441 $ 26,017,050
Restricted 2,128,459 1,721,067 1,974,677 2,590,989
Unrestricted 4,020,580 3,518,417 2,674,119 4,084,460
Total business -type
activities net position $ 27,885,698 $ 29,555,594 $ 31,281,237 $ 32,692,499
Primary government
Net investment in capital
assets $ 25,004,724 $ 29,654,618 $ 32,503,422 $ 32,740,858
Restricted 2,935,239 3,842,613 3,545,509 4,422,731
Unrestricted 9,422,852 7,285,378 6,658,383 8,474,774
Total primary government
net position $ 37,362,815 $ 40,782,609 $ 42,707,314 $ 45,638,363
104
Table 1
2014 2015 2016 2017 2018 2019
$ 10,924,631 $ 11,870,401 $ 14,242,464 $ 15,186,419 $ 18,580,077 $ 20,511,801
1,700,808 1,558,393 1,753,856 2,518,696 3,089,866 3,757,005
4,433,988 4,797,140 4,030,053 2,977,656 1,466,288 1,312,978
$ 17,059,427 $ 18,225,934 $ 20,026,373 $ 20,682,771 $ 23,136,231 $ 25,581,784
$ 27,110,293 $ 30,507,881 $ 32,483,743 $ 34,669,712 $ 36,693,299 $ 38,536,890
2,591,211 2,591,600 2,596,324 2,605,482 2,631,171 2,677,877
6,546,829 6,190,061 8,522,788 9,096,374 8,308,697 11,444,287
$ 36,248,333 $ 39,289,542 $ 43,602,855 $ 46,371,568 $ 47,633,167 $ 52,659,054
$ 38,034,924 $ 42,378,282 $ 46,726,207 $ 49,856,131 $ 55,273,376 $ 59,048,691
4,292,019 4,149,993 4,350,180 5,124,178 5,721,037 6,434,882
10,980,817 10,987,201 12,552,841 12,074,030 9,774,985 12,757,265
$ 53,307,760 $ 57,515,476 $ 63,629,228 $ 67,054,339 $ 70,769,398 $ 78,240,838
105
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
Total governmental
activities program revenues
2010
$ 1,511,119
3,389,490
390,313
534,476
247,420
40,961
60,629
107,315
6,281,723
6,093,635
6,093,635
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
243,163
40,996
51,500
104,518
6,497,638
6,151,253
6,151,253
2013
$ 1,301,963
3,395,465
497,540
580,312
485,977
64,878
36,267
105,022
6,467,424
6,279,271
6,279,271
$ 12,375,358 $ 12,025,399 $ 12,648,891 $ 12,746,695
$ 131,750
10,825
2,951
202,067
1,001,630
1,349,223
$ 149,790
10,273
2,170
183,874
1,191,157
1,537,264
$ 160,990 $ 326,565
15,593 11,426
2,970
228,457
203,301
3,190
175,347
334,525
611,311 851,053
106
Table 2
(4 pages)
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
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
2018 2019
$ 1,865,408
4,666,798
684,226
478,122
466,791 498,150
57,673 42,038
398,802 429,684
95,571 114,957
8,427,028
8,120,546
302,983
8,423,529
1,865,007
4,705,989
718,593
468,057
488,592
34,311
493,868
140,004
8,779,383 8,914,421
8,949,652
458,118
9,355,337
566,231
9,407,770 9,921,568
$ 13,417,718 $ 14,607,317 $ 15,606,362 $ 16,850,557 $ 18,187,153 $ 18,835,989
$ 126,909
13,893
4,140
316,576
3,741,958
4,203,476
$ 182,109
12,068
187,682
5,155
10,610
253,460
651,084
$ 122,233
13,645
184,863
41,000
4,720
28,052
1,393,799
1,788,312
570,035
1,020,388
$ 214,056
13,555
185,922
$ 208,837
19,938
245
5,000 360,440
5,130 5,940
26,690 197,119
1,634,422
158,451
16,016
730
29,000
6,537
221,637
3,379,916
2,426,941 3,812,287
107
Town of Hillsborough, North Carolina
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
2010 2011 2012 2013
Business -type activities:
Charges for services:
Water and sewer $ 6,425,750 $ 6,755,260 $ 7,366,996 $ 7,686,356
Stormwater -
Capital grants and
contributions - 658,828 100,000
Total business -type
activities program revenues 6,425,750 7,414,088 7,466,996 7,686,356
Total primary government
program revenues $ 7,774,973 $ 8,951,352 $ 8,078,307 $ 8,537,409
Net (Expense) Revenue
Governmental activities $ (4,932,500) $ (4,729,375) $ (5,886,327) $ (5,616,371)
Business -type activities 332,115 1,655,328 1,315,743 1,407,085
Total primary government
net expense $ (4,600,385) $ (3,074,047) $ (4,570,584) $ (4,209,286)
General Revenues and Other
Changes in Net Position
Governmental activities:
Taxes $ 5,898,215 $ 5,808,387 $ 5,816,041 $ 6,371,494
Unrestricted inter-governemental
revenues 615,770 635,907 651,381 734,401
Investment earnings, unrestricted 29,889 10,838 4,748 3,874
Miscellaneous 35,327 24,141 16,250 26,389
Transfers
Total governmental
activities
6,579,201 6,479,273 6,488,420 7,136,158
Business -type activities:
Investment earnings 27,967 14,568 6,869 4,177
Miscellaneous
Transfers
Total business -type
activities
27,967 14,568
6,869 4,177
Total primary government $ 6,607,168 $ 6,493,841 $ 6,495,289 $ 7,140,335
Change in Net Position
Governmental activities $ 1,646,701 $ 1,749,898 $ 199,062 $ 1,519,787
Business -type activities 360,084 1,669,896 1,725,643 1,411,262
Total primary government $ 2,006,785 $ 3,419,794 $ 1,924,705 $ 2,931,049
108
Table 2
(4 pages)
2014 2015 2016 2017 2018 2019
$ 9,025,607 $ 8,939,712 $ 10,713,397 $ 9,214,401 $ 10,249,270 11,890,751
- 632,738 638,441 659,071
1,028,171 1,484,316 1,161,830 1,325,206 363,598 32,361
10,053,778 10,424,028
11, 875,227 11,172, 345
11,251,309 12,582,183
$ 14,257,254 $ 11,075,112 $ 13,663,539 $ 12,192,733 $ 13,678,250 $ 16,394,470
$ (2,942,931) $ (6,572,669) $ (6,244,018) $ (7,406,640) $ (6,352,442) (5,102,134)
3,782,467 3,040,464 4,301,195 2,748,816 1,843,539 2,660,615
$ 839,536 $ (3,532,205) $ (1,942,823) $ (4,657,824) $ (4,508,903) $ (2,441,519)
$ 6,603,311 $ 6,698,408 $ 6,949,754 $ 7,426,516 $ 8,187,327 $ 8,238,074
809,190 998,629 1,034,811 1,010,393 1,080,184 1,135,259
2,209 1,177 16,771 37,562 120,273 261,029
39,899 40,962 43,121 58,811 88,047 (12,933)
- - - (2,073,742)
7,454,609 7,739,176 8,044,457 8,533,282 9,475,831 7,547,687
2,601 745 12,118 19,897 44,935 243,186
- - - - (246,949) 48,344
- - 2,073,742
2,601 745 12,118 19,897 (202,014) 2,365,272
$ 7,457,210 $ 7,739,921 $ 8,056,575 $ 8,553,179 $ 9,273,817 $ 9,912,959
$ 4,511,678 $ 1,166,507 $ 1,800,439 $ 1,126,642 $ 3,123,389 $ 2,445,553
3,785,068 3,041,209 4,313,313 2,768,713 1,641,525 5,025,887
$ 8,296,746 $ 4,207,716 $ 6,113,752 $ 3,895,355 $ 4,764,914 $ 7,471,440
109
Town of Hillsborough, North Carolina
Fund Balances
Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
2010 2011 2012 2013
General fund:
Reserved $ 1,230,710 $ - $ - $ -
Unreserved 3,832,453 - -
Nonspendable - 477 68,649 4,253
Restricted - 1,047,758 955,064 1,115,688
Committed -
Assigned - 215,354 88,094 330,206
Unassigned - 3,478,868 3,803,076 4,151,725
5,063,163 4,742,457
All other governmental funds:
Reserved 200,000
Unreserved 639,599 -
Nonspendable - 52
Restricted - 1,073,788 227,052 716,054
Committed - 204,943 856,356 -
Assigned - - 131,490
Unassigned - (324,964) (112,038) (20,444)
4,914,883 5,601,872
839,599 953,767
971,370 827,152
Total fund balance $ 5,902,762 $ 5,696,224 $ 5,886,253 $ 6,429,024
110
Table 3
2014 2015 2016 2017 2018 2019
$ - $ - $ $ - $ - $
72,156 68,242 175,392 219,730 1,848
1,110,734 1,049,112 1,385,320 1,452,915 2,367,086 3,451,333
782,995 1,294,457 672,896 787,525 985,729 724,066
4,151,581 3,805,372 3,698,078 4,049,462 4,090,432 3,779,628
6,117,466 6,217,183 5,931,686 6,509,632 7,445,095 7,955,027
844,464
106,105
7,070
509,281
272,548
368,536 1,065,781 722,780 305,672
171,698 159,314 385,520 228,293
- - - (808,382) (242,109) (1,023,574)
957,639 781,829 540,234 416,713 866,191 (489,609)
$ 7,075,105 $ 6,999,012 $ 6,471,920 $ 6,926,345 $ 8,311,286 $ 7,465,418
Note: 2010 and earlier amounts have not been restated for the implementation of GASB Statement 54.
111
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
2010
$ 4,819,371
1,131,562
615,770
306,662
29,889
200,000
142,575
31,518
7,277,347
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
2,552,912 1,232,665 1,235,107
3,263,200 3,347,597 3,164,361
720,627 1,718,386 1,693,664
580,854 583,919 476,415
247,420 256,092 243,163
54,137 54,946 325,666
344,499 791,184 239,105
238,111 303,074 283,126
93,874 107,928 98,896
8,095,634 8,395,791 7,759,503
(818,287) (313,538) (462,211)
628,118
(628,118)
1,210,400
1,210,400
717,582
(717,582)
107,000
107,000
440,409
(843,440)
16,250
1,039,021
652,240
2013
$ 5,135,469
1,229,425
734,401
308,007
3,874
337,991
34,079
7,783,246
1,122,514
3,134, 327
1,011,557
471,880
485,977
64,878
430,831
407,246
111,265
7,240,475
542,771
369,627
(369,627)
$ 392,113 $ (206,538) $ 190,029 $ 542,771
$ 1,907,332 $ 2,280,672 $ 1,501,851 $ 997,107
5.36%
6.72%
6.10% 8.30%
112
Table 4
2014 2015
$ 5,429,114
1,199,185
809,190
768,716
2,209
1,445,207
140,802
48,337
9,842,760
$ 5,437,266
1,263,425
998,629
642,732
1,177
1,325,271
194,177
2016
$ 5,669,002
1,280,114
1,034,811
262,144
16,771
381,406
176,878
56,727 118,323
9,919,404
8,939,449
2,799,302 2,779,807 2,207,284
3,455,438 3,845,174 4,317,978
851,502 1,194,204 878,233
806,262 1,008,615 564,148
367,389 388,611 397,828
119,251 836,258 821,677
1,675,156 423,813 147,350
474,458 632,155 1,037,623
118,711 101,228 120,355
10,667,469 11,209,865 10,492,476
(824,709)
169,054
(169,054)
(1,256,353)
2,727,143
1,470,790
(1,290,461) (1,553,027)
160,482
(160,482)
1,214,368
1,214,368
465,037
(465,037)
1,025,935
1,025,935
2017
$ 6,064,137
1,381,990
1,010,393
374,938
37,562
18,955
232,611
79,734
2018 2019
$ 6,701,848
1,502,359
1,080,184
726,194
120,273
22,434
583,186
53,804
$ 6,491,857
1,728,857
1,135,259
271,509
261,029
12,582
199,411
50,176
9,200,320 10,790,282 10,150,680
1,627,479 3,026,060 2,042,811
4,084,416 4,811,024 4,300,485
865,285 1,014,932 916,097
454,355 516,910 345,220
676,147 1,104,113 596,145
57,673 42,038 158,906
428,452 478,585 1,472,101
790,345 1,296,056 1,033,807
100,353 105,063 130,976
9,084,505 12, 394, 781 10,996,548
115,815 (1,604,499) (845,868)
394,991 344,808 219,416
(394,991) (344,808) (219,416)
21,610
317,000
338,610
$ 646,081 $ (76,093) $ (527,092) $ 454,425
43,670
2,945,770
2,989,440
$ 1,384,941 $ (845,868)
$ 2,246,332 $ 2,619,910 $ 1,962,820 $ 893,524 $ 3,336,241 $ 2,202,180
7.04% 8.54%
13.58% 10.87% 15.47% 13.24%
113
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114
Revenue Capacity Information
115
Town of Hillsborough, North Carolina
Program Revenues by Function/Program
Last Ten Fiscal Years
(accrual basis of accounting)
2010 2011 2012 2013
Function/program
Governmental activities:
General government $ 331,750 $ 382,843 $ 354,227 $ 361,590
Public Safety 28,874 10,273 15,593 11,426
Transportation 543,741 848,978 228,521 185,847
Environmental
protection
Economic and
physical development
Community activities and
projects - - -
Parks and recreation 444,858 295,170 12,970 292,190
Subtotal governmental
activities
1,349,223 1,537,264
611,311 851,053
Business -type activities:
Water and sewer 6,425,750 7,414,088 7,466,996 7,686,356
Stormwater -
Subtotal business -type
activities
6,425,750 7,414,088
7,466,996 7,686,356
Total primary government $ 7,774,973 $ 8,951,352 $ 8,078,307 $ 8,537,409
116
Table 5
2014 2015 2016 2017 2018 2019
$ 1,388,937 $ 192,719 $ 1,430,962 $ 230,872 $ 258,394 $ 2,767,963
13,893 12,068 13,645 13,555 125,557 21,804
312,282 187,682 264,863 396,200 414,083 200,695
2,059,224 653 4,680 9,874 - -
- - 41,000 340,134 855,135 29,000
429,140 257,962 33,162 29,753 773,772 792,825
4,203,476 651,084 1,788,312 1,020,388 2,426,941 3,812,287
10,053,778 10,424,028 11,875,227 10,539,607 10,612,868 11,890,751
- 632,738 638,441 691,432
10,053,778 10,424,028 11,875,227 11,172,345 11,251,309 12,582,183
$ 14,257,254 $ 11,075,112 $ 13,663,539 $ 12,192,733
$ 13,678,250 $ 16,394,470
117
Town of Hillsborough, North Carolina
Tax Revenues by Source
Governmental Funds a
Last Ten Fiscal Years
(modified accrual basis of accounting)
Table 6
Fiscal Ad Valorem
Year Taxes
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Change
2010-2019
4,819,371
4,610,003
4,716,460
5,135,469
5,429,114
5,437,266
5,669,002
6,064,137
6,701,848
6,491,857
b
34.70%
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 34.70 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 2010 to 2019.
118
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
2010 657,426,788 83,569,294 11,954,916 752,950,998 0.6200 100.00%
2011 653,238,545 84,168,694 10,825,503 748,232,742 0.6200 100.00%
2012 661,688,578 85,866,250 11,371,703 758,926,531 0.6200 100.00%
2013 667,581,857 83,022,657 11,710,268 762,314,782 0.6800 100.00%
2014 674,676,352 99,378,379 11,710,269 785,765,000 0.6800 100.00%
2015 676,291,406 98,629,989 12,462,428 787,383,823 0.6800 100.00%
2016 676,946,203 130,843,708 14,137,738 821,927,649 0.6800 100.00%
2017 733,447,012 132,527,541 14,138,094 880,112,647 0.6800 100.00%
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%
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.
119
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
2010 0.620 0.620 - 0.8580
2011 0.620 0.620 - 0.8580
2012 0.620 0.620 - 0.8580
2013 0.680 0.680 - 0.8580
2014 0.680 0.680 - 0.8780
2015 0.680 0.680 0.8780
2016 0.680 0.680 - 0.8780
2017 0.680 0.680 0.8780
2018 0.620 0.620 0.8380
2019 0.620 0.620 - 0.8504
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.
120
Town of Hillsb orough, No rth Carolina
Property Tax Rev enue and Collecti ons
Last Ten Fiscal Y ears
T able 9
Fiscal Collected within the
Year Taxes Le vied Fi scal Year of the Levy C ollections Total Collections to Date
Ended for the Percentage in Subsequent Percentage
June 30, Fiscal Year Amount of Levy Years Amo unt of Levy
2010 $ 4,732,461 $ 4,641,581 98 .09 % $ 84,863 $ 4,726,444 99 .87%
2011 4,690,863 4,557,501 97.16% 122,865 4,680,366 99.78%
2012 4,755,200 4,641,541 97.61 % 105,396 4,746,937 99.83 %
2013 5,225,057 5,085,225 98.82% 125,776 5,211,001 99.73 %
2014 5,418,579 5,315,921 98 .11% 88,529 5,404,450 99 .74%
2015 5,413,151 5,343,909 98.72% 57,898 5,401,807 99 .79%
2016 5,646,239 5,583,929 98.90% 47,525 5,631,454 99.74 %
2017 6,044,907 5,995,089 99.18% 31,629 6,026,718 99.70%
2018 6,676,687 6,618,458 99 .13% - 6,639,615 99 .44%
2019 6,952,134 6,899,076 99 .24% 6,899,076 99 .24%
So urces: Orange County Board of Equalization and Assessment, and Orange County Department of Finance.
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122
T own of Hillsborough, North C arolina
Pr incipal P rop erty T axpayers
Cur re nt Year and Nine Y ears Ago
Tabl e 10
Taxpayer
2019 2010
Ta xable
Assessed
Value
Rank
Percentage
of Total City
Taxable Taxable
Assessed Ass essed
Valu e Value
Rank
Percentage
of Total City
Taxabl e
Assessed
Value
CATES CREEK APARTMENTS LLC $ 25,189,600 1 2.86%
*PATRIOTS POINTE PARTNERS LLC 21,632,074 2 2.46 % $ 16,048,910 1 2 .13%
DANIEL BOONE LTD 12,345,000 3 1.40% 9,554,772 5 1 .27%
ASHTON RALEIGH RESIDENTIAL LLC 11,924,590 4 1 .35%
ALCURT HILLSBOROUGH LLC 11,269,600 5 1.28%
WALMART REAL ESTATE BUSINESS TRUST 10,509,400 6 1.19 % 13,675,468 3 1.82%
PHE INC 10,226,661 7 1.16% 9,250,246 6 1.23%
M DCO LLC 10,214,600 8 1.16%
SPORTS ENDEAVORS INC 8,321,291 9 0.95% 6,831,430 10 0 .91 %
** STIHL INC DBA MID ATLANTIC STIHL 8,073,965 10 0.92%
SLF II NC WATERSTONE LLC - 14,210,460 2 1.89 %
HD DEVELOPMENT OF MARYLAND INC - - 9,560,634 4 1.27%
TELESIS CONSTRUCTION MANAGEMENT - - 7,816,320 7 1 .04%
MEADOWLANDS - 7,219,316 8 0.96%
HILLSBOROUGH COMMONS - - 6,987,860 9 0.93%
Total $ 129,706,781 14.73% $ 101,155,416 13.45%
Source: Orange County Property Assessment Division
123
Town of Hillsborough, North Carolina
Water Sold by Type of Customer and In and Out of Town
Last Ten Fiscal Years
Type of Customer
2010 2011 2012 2013
Gallons billed:
In -town residential 91,194,583 103,459,804 102,937,205 102,755,771
Out-of-town residential 106,627,659 112,868,479 120,107,805 130,921,523
In -town commercial 89,569,350 74,881,598 73,507,962 76,624,165
Out-of-town commercial 22,056,653 18,219,706 18,296,584 18,153,125
Total gallons billed
309,448,245 309,429,587 314,849,556 328,454,584
Total water and sewer charges
(revenue) $ 6,194,638 $ 6,405,307 $ 6,928,835 $ 7,262,510
Total average rate per 1,000
gallons
$ 20.02 $ 20.70 $ 22.01 $ 22.11
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.
124
Table ii
2014 2015 2016 2017 2018 2019
111,836,111 98,914,635 100,064,880 131,412,141 131,845,575 134,946,195
111,241,276 124,805,789 100,445,055 120,756,780 111,132,741 111,898,328
78,590,500 81,985,440 75,012,631 85,946,109 79,996,750 83,253,819
17,908,575 29,452,224 18,028,437 20,781,379 19,695,072 21,276,361
319,576,462 335,158,088
$ 7,499,183
293,551,003 358,896,409
$ 7,859,823 $ 7,988,498
342,670,138 351,374,703
$ 8,294,061 $ 8,706,345 $ 9,494,939
$ 23.47 $ 23.45 $ 27.21 $ 23.11 $ 25.41 $ 27.02
125
Town of Hillsborough, North Carolina
Water and S ewer Rates
Last Ten Fiscal Y ea rs
Table 12
In -Town Water In -T own Sewer
Out -of -Town Water Out -of -Town Sewer
Rate per Rate per Rate per Rate per Rate per Rate per Rat e p er Rate per
Fiscal 0-2,500 1,000 0-2,500 1,000 0-2,500 1,000 0-2,500 1,000
Year Gallons Gallons Gall on s Gallons Gall on s Gallons Gall ons Gallons
2010 $ 21. 75 $ 7 .25 $ 22.74 $ 7.58 $ 42.40 $ 14.13 $ 44 .36 $ 14.79
2011 21. 75 7 .25 23 .88 7.96 42.42 14 .14 46.56 15 .52
2012 23.04 7.68 25 .98 8.66 44.94 14 .98 50.67 16.89
2013 24. 21 8.07 28.26 9.42 47.22 15.74 55.11 18 .37
2014 21.79 8.07 30.11 11.15 42 .50 15 .74 58.70 21 .74
2015 21.79 8.07 31.54 10.25 47 .22 15.74 59.97 27.68
2016 20.98 8. 07 30.33 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
Rate changes are effective with July 1 water usage unless otherwise stated.
The construction of a reservoir in 1998 and reno vations of an aging water and wastewater treatment plant have caused significant increases in water and sewer
rates over the past ten years.
Prior to 7/1/15, a flat charge was bille d for 0 to 2,700 gallons. Any usage over 2,700 gallons was billed per 1,000 gallons rate.
Beginning 7/1/15, a flat charge was billed for 0 to 2,600 gallons. Any usage over 2,600 gallons is billed per 1,000 gallons rate .
Beginning 7/1/16, a flat charge is billed for 0 to 2,500 gallons. Any usage over 2,500 gallons is billed per 1,000 gallons rate.
126
Debt Capacity Information
127
Town of Hillsborough, No rth C arolina
Ratios of Out standing Debt by Type
Last Ten Fiscal Years
Table 13
Governmental
Activities
Busines s -Type Acti vities
General Total
Fiscal In stallment Obligation Special Re ven ue Premium on Revol ving Installment Primary Per
Ye ar Loans B onds B onds B onds Loans L oan s G overnment Capita a
2010 $ 2,932,216 $ 86,000 $ - $ $ 1,219,557 $ 6,258,012 $ 10,495,785 $ 1,555
2011 2,736,142 50,000 - 1,143,336 5,741,602 9,671,080 1,582
2012 3,440,001 14,000 5,575,878 5,871,812 14,901,691 2,388
2013 3,084,791 - - - 16,247,369 4,914,368 24,246,528 3,850
2014 4,024,586 - 18,644,077 3,939,307 26,607,970 4,170
2015 4,606,799 - 18,605,655 2,970,088 26,182,542 4,161
2016 4,534,728 18,511,848 3,269,750 26,316,326 4,102
2017 4,025,201 - - 17,443,655 2,513,821 23,982,677 3,651
2018 5,829,231 - 10,155,000 1,018,674 16,435,812 522,266 33,960,983 4,612
2019 4,632,280 10,155,000 970,330 15,397,010 552,936 31,707,556 4,380
N ote: Details regarding the Town's ou tstan ding debt can be fou nd in the notes to the financial statements .
a See Table 17 for population data. These ratios are calculated using population for the prior cal endar year .
128
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
2010 86,000 86,000 0.00% 13
2011 50,000 50,000 0.00% 8
2012 14,000 14,000 0.00% 2
2013 - - 0.00%
2014 - 0.00%
2015 - - 0.00%
2016 - 0.00%
2017 - - 0.00% -
2018 - - 0.00%
2019 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.
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130
Town of Hillsborough, North Carolina
Direct and Overlapping Governmental Activities Debt
June 3o, 2019
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 $ 251,787,682 2.346% $ 5,906,348
Town's overlapping debt 5,906,348
Town's direct debt 4,632,280
Total direct and overlapping debt $ 10,538,628
Sources: Assessed value data used to estimate applicable percentages provided by the Orange County
Property Assessment Division. Debt outstanding data provided by each governmental unit.
131
Town of Hillsborough, North Carolina
Legal Debt Margin Information
Last Ten Fiscal Years
2010 2011 2012 2013
Debt limit $ 60,236,080 $ 59,858,619 $ 60,714,122 $ 60,985,183
Total net debt applicable
to limit
2,932,216 2,736,142
3,440,001 3,084,791
Legal debt margin $ 57,303,864 $ 57,122,477 $ 57,274,121 $ 57,900,392
Total net debt applicable to the
limit as a percentabe of debt limit
4.87% 4.57% 5.67% 5.06%
Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of
total assessed property value.
132
Table 16
Legal Debt Margin
Calculation for Fiscal Year 2019
Assessed value $ 1,088,855,671
Debt limit (8% of assessed value) 87,108,454
Debt applicable to limit:
Installment loans (4,632,280)
Legal debt margin $ 82,476,174
2014 2015 2016 2017 2018 2019
$ 62,861,200 $ 62,990,706 $ 65,754,212 $ 70,409,012 $ 84,198,890 $ 87,108,454
4,024,586 4,606,799
4,534,728 4,025,201
5,829,231 4,632,280
$ 58,836,614 $ 58,383,907 $ 61,219,484 $ 66,383,811 $ 78,369,659 $ 82,476,174
6.40% 7.31% 6.90% 5.72% 6.92% 5.32%
133
Demographic and Economic Information
134
Town of Hillsbo rough, North Carolina
Demographi c and Economic St atistics
Last T en Fiscal Y ears
Tabl e 17
Pers onal Per
Income Capita
(thousands Personal Median School Unemployment
Year Population of dollars) Income Age Enrollment Rate
2010 6,751 6,268,886 46,713 33.18 1,279 6.6%
2011 6,113 * * 33 .42 1,305 7.3%
2012 6,239 * * 33 .62 1,420 7.1%
2013 6,298 * * 33 .99 1,433 5.3%
2014 6,381 4,905,216 34,949 33.10 1,370 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%
Note: Personal income, per capita personal income, median age, and unemployme nt are not available at the town level and is reported at the county level.
Unemployment is reported for the month of June of each year.
* Information not available per Oran ge Cou nty Economic Development
Sou rces: Population and median age information provided by the State Library of North Carolina . Personal income information provided by the Orange County
Economic Development Office. Unemployment data provided by the Employment Security Commission. School enrollment data provided by the Orange
County Board of Education.
No te: Population, median age, and e du cation level information are based on surveys conducted during the last quarter of the calendar year . Personal income
information is a total for the year. Unemployment rate information is an adjusted yearly average. School enrollment is based on the census at the start of the
school year.
135
Town of Hillsborough, North Carolina
Principal Employers
Current Year and Nine Years Ago
Table 18
Employer
2019 2010
Percentage Percentage
of Total of Total
Town Town
Employees Population Employees Population
Orange County Schools 1,135 17.69% 987 14.99%
Orange County Government 822 12.81% 1,224 18.59%
UNC Hospital 624 9.73%
Summit Consulting -Engineering 352 5.49%
Sports Endeavors, Inc. dba Eurosport 328 5.11% 531 8.07%
Wal-Mart Associates Inc 313 4.88% 287 4.36%
Brookshire Inc 153 2.39% 124 1.88%
Home Depot 123 1.92% 107
Weaver Street Market, Inc 104 1.62% 100 1.52%
Town of Hillsborough 101 1.57%
PHE 342 5.19%
Thalle Construction Co. 111 1.69%
Piedmont Electric Membership Corp 96 1.46%
Total
4,055 56.02% 3,909 57.75%
Source: Town Economic Development Division and Employment Security Commission.
Note: Information regarding Town's total employment is not available.
* Data not available
136
Town of Hillsborough, North Carolina
Full -Time Equivalent City Government Employees by Function/Program
Last Ten Fiscal Years
Table 19
Function/Program 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
General government
Administration 4 4 3 3 5 5 7 9 7.3 9.5
Finance 4 4 4 4 4 4 5 5 6 5.3
Planning 3 3 3 3 4 4 5 5 5 5
Public space - - - - 1 2 2
Safety 1 1 1 1 1 1 1 1 1 1
Stormwater - 1 1 1 2 3 3
Police
Officers 26 26 25 27 24 28 26 28 29.3 27.8
Civilians 2 2 1 1
Public works
Streets 4 4 3 3 3 4 4 4 4 4
Sanitation 4 4 4 4 4 4 4 3 4 4
Motor pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 4 4 4 4 4 4 4 4 3 3
Billing and collection 6 5 5 5 5 6 6 6 4.5 4.5
Water 6 6 6 6 6 6 6 6 8 8
Wastewater 10 8 8 8 7 6 6 8 6 6
Water distribution/
wastewater collection 8 8 11 11 11 11 12 10 13 13
Fire inspections 1 1 1 1 1 1 1 1.5 1.4 1.4
Total
86 83 81 83 83 88 91 96 101.5 101.5
Source: Town Finance Office. Positions reported at June 30th are positions filled.
137
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138
Operating Information
139
Town of Hillsborough, North Carolina
Operating Indicators by Function/Program
Last Ten Fiscal Years
Function/Program
2010 2011 2012 2013
Police
Physical arrests 546 475 560 538
Calls for service 9,619 12,889 15,039 14,569
Traffic citations 1,712 1,182 1,134 1,651
Number of policeman positions 29 29 29 26
Fire
Number of stations 1 1 1 1
Emergency responses (EMS and fire) 1,865 1,835 1,770 1,866
Fires extinguished 75 19 78 70
Number of paid firemen 24 24 25 24
Number of volunteers 15 12 14 19
Inspections 213 211 258 177
Refuse collection
Refuse collected (tons per day) 6.1 5.95 6.34
Recyclables collected (tons per day) * * *
Other public works
Street resurfacing (miles) 2.25
Potholes repaired 45 41 36 30
Parks and recreation
Number of parks 6 6 6 6
Library
Volumes in collection 75,506 86,526 97,536 93,421
Total volumes borrowed 203,450 287,938 351,216 397,379
Water
New connections 939 815 767 736
Water main breaks 41 10 30 20
Average daily consumption
(millions of gallons per day) 1.124 1.129 1.048 0.913
Peak daily consumption
(millions of gallons) 1.626 1.653 1.576 1.653
Wastewater
Average daily sewage treatment
(millions of gallons) 0.888 0.757 0.765 0.902
Education
Number of schools a 3 3 3 3
Number of teachers 111 111 113 113
Number of students 1,279 1,305 1,420 1,433
Number of classrooms b 95 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
140
Table 20
2014 2015 2016 2017 2018 2019
521 553 492 611 640 640
12,279 15,975 16,674 10,599 13,287 13,287
1,212 725 557 567 496 496
26.5 27 29 29 29 29
1 1 1 1 1 1
1,950 1,978 1,949 1,954 2,034 2,059
45 107 80 109 113 92
24 27 22 23 24 24
15 12 12 12 12 10
132 171 163 138 155 138
5.90 5.54 6 6 6.25 6.76
0.02 0.48 1 1 1.00 1.00
2.13 4.7 2 2 2.38 0.90
36 30 25 15 8.00 10.00
6 6 7 7 7 7
93,886 93,656 96,393 101,177 96,498 90,378
396,164 412,416 446,499 382,740 403,088 400,858
799 840 946 821 223
15 11 27 33 23 8
1.103 1.071 1.401 1.453 0.963 1.656
1.685 1.815 1.983 2.431 2.058 3.176
1.133 0.895 1.185 1.000 0.951 1.236
3 3 3 3 3 3
112 112 112 112 115 103
1,370 1,393 1,408 1,325 1,342 1,319
65 65 65 65 65 c 65 c
141
Town of Hillsborough, North Carolina
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Function/Program
2010 2011 2012 2013
Police
Stations 2 2 2 2
Patrol units 26 28 27 26
Fire stations 1 1 1 1
Refuse collection
Collection trucks 6 6 7 7
Other public works
Streets (miles) - paved 36.15 36.15 36.15 36.15
Streets (miles) - unpaved 0.73 0.73 0.73 0.73
Streetlights 633 633 633 633
Traffic signals (all state-owned) - -
Parks and recreation
Acreage b 72.62 72.62 74.10 74.10
Playgrounds 4 4 4 4
Water
Water mains (miles) 147.0 147.0 148.0 148.0
Fire hydrants " 597 A 614 663 621
Storage capacity (thousands of gallons) 3,000 3,000 3,000 3,000
Wastewater
Sanitary sewers (miles) 86.4 86.4 89.0 93.0
Treatment capacity (millions of gallons) 3.0 3.0 - 3.0
Stormwater
Catch basins and inlets
Storm sewers (miles) a 73.0 73.0 73.0 73.0
Area (square miles) 5.740 5.740 5.740 5.760
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.
c 2012 figure included private hydrants - 2013 actual number of hydrants from GIS
A Estimated
142
Table 21
2014 2015 2016 2017 2018 2019
2 2 2
27 27 25
1 1 1
8 8 8
2 2 2
24 34 34
8
8 8
36.15 37.63 33.96 33.96 33.96 33.52
0.91 0.69 0.68 0.68 0.68 0.68
678 679 709 709 711 726
74.10 74.10 74.1 74.1 74.1 74.1
4 4 5 5 5 5
150.0 151.0 149.0 151.0 151.0 151.0
619 628 628 705 705 705
3,000 3,000 3,500 2,450 2,450 2,450
93 94.0 96.5 80.5 97 101.4
3 3.0 3.0 3.0 3.0 3.0
75 75.0 75.0
5.80 5.800 6
75.0
6
491 491
43.6 43.6
6 6.07
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144
Other Disclosures
145
Town of Hillsborough
Other Disclosures
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 151 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 2018 was approximately 1.54 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 2020.
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
146
Town of Hillsborough
Other Disclosures
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, 2019.
Number of
Number of Inside Outside Town
Town Accounts Accounts
3,398
Total
2,735 6,133
As of June 30, 2019, the water system's customers were comprised of
approximately 90% residential customers (including multi -family accounts) and 10%
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, 2019, 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.
147
Town of Hillsborough
Other Disclosures
Customer Account
UNC Central Utility Building
LHNH - Patriots Pointe
Partners, LLC
State of North Carolina
Horizon Acquisitions 3 LLC
Cates Creek Apartments
Al Curt Hillsborough, LLC
VS Property Services
Orange County High School
Orange County
Orange County Finance Dept.
Total
Annual Water
Revenues
$93,685
72,404
66,491
60,990
58,215
53,034
41,807
38,862
38,304
34,512
$558,304
Note: Totals may not foot due to rounding.
The Sanitary Sewer System
Percentage of
Total Water
System
Revenues
2.03%
1.57
1.44
1.32
1.26
1.15
0.91
0.84
0.83
0.75
12.11%
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 0.86 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
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 2020.
148
Town of Hillsborough
Other Disclosures
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, 2019:
Number of
Number of Inside Outside Town
Town Accounts Accounts
Total
3,204
1,230 4,434
149
Town of Hillsborough
Other Disclosures
As of June 30, 2019, 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 2019, 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
Orange County Efland Cheeks
LHNH -Patriots Pointe Partners,
LLC
State of North Carolina
Horizons Acquisitions 3, LLC
Cates Creek Apts.
Al Curt Hillsborough, LLC
Orange County
Orange High School
Orange County Finance Dept.
Weaver Street Market
Total
Note: Totals may not foot due to rounding.
Annual
Sanitary Sewer
Revenues
$132,035
107,350
98,720
89,929
86,106
78,475
60,693
60,253
51,062
45229
$809,851
Percentage of
Total Annual
Sanitary Sewer
Revenues
2.78%
2.26
2.08
1.89
1.81
1.65
1.28
1.27
1.07
0.95
17.04%
150
Compliance Section
151
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152
DHG
DIXON HUGHES GOODMAN LLP
Independent Auditors' Report on Internal Control over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
Honorable Mayor and Members of
the Board of Town Commissioners
Town of Hillsborough, North Carolina
We have audited, in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States, the accompanying financial statements of the governmental
activities, business -type activities, the aggregate discretely presented component units, each major fund
and the aggregate remaining fund information of the Town of Hillsborough, North Carolina (the "Town"), as
of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively
comprise the Town of Hillsborough's basic financial statements, and have issued our report thereon dated
January 10, 2020. The financial statements of the Hillsborough Tourism Board and Hillsborough Tourism
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) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the Town's internal control. Accordingly, we do
not express an opinion on the effectiveness of the Town's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent or detect and correct
misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in
internal control, such that there is a reasonable possibility that a material misstatement of the entity's
financial statements will not be prevented or detected and corrected on a timely basis. A significant
deficiency is a deficiency or a combination of deficiencies in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control over financial reporting 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 to be material weaknesses. However, material
weaknesses may exist that have not been identified.
153
DHG
DIXON HUGHES GOODMAN LLP
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
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed 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 results of that testing, and not to provide an opinion on the effectiveness of the entity's internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity's internal control and compliance. Accordingly,
this communication is not suitable for any other purpose.
i-fryha4averifiaiiLIF
High Point, North Carolina
January t0, 2020
154
DHG
DIXON HUGHES GOODMAN LLP
Independent Auditors' Report on Compliance for the Major
Federal Program and on Internal Control over Compliance in
Accordance with OMB Uniform Guidance and the State Single
Audit Implementation Act
Honorable Mayor and Members of
the Board of Town Commissioners
Town of Hillsborough, North Carolina
Report on Compliance for the Major Federal Program
We have audited Town of Hillsborough, North Carolina's compliance with the types of compliance
requirements described in the OMB Compliance Supplement and the Audit Manual for Governmental
Auditors in North Carolina, issued by the Local Government Commission that could have a direct and
material effect on its major federal program for the year ended June 30, 2019. The Town of Hillsborough's
major federal program is identified in the summary of auditors' results section of the accompanying
schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants
applicable to is federal programs.
Auditors' Responsibility
Our responsibility is to express an opinion on compliance of the Town of Hillsborough's major federal
program based on our audit of the types of compliance requirements referred to above. We conducted our
audit of compliance in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance), and the State Single Audit Implementation Act. Those standards, the
Uniform Guidance, and the State Single Audit Implementation Act require that we plan and perform the
audit to obtain reasonable assurance about whether noncompliance with the types of compliance
requirements referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the Town of Hillsborough's
compliance with those requirements and performing such other procedures as we considered necessary in
the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal
program. However, our audit does not provide a legal determination on the Town of Hillsborough's
compliance.
155
DHG
DIXON HUGHES GOODMAN LLP
Opinion on the Major Federal Program
In our opinion, the Town of Hillsborough complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on its major federal program for
the year ended June 30, 2019.
Report on Internal Control over Compliance
Management of the Town of Hillsborough is responsible for establishing and maintaining effective internal
control over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the Town of Hillsborough's internal control over
compliance with the types of requirements that could have a direct and material effect on a major federal
program to determine the auditing procedures that are appropriate in the circumstances for the purpose of
expressing our opinion on compliance for the major federal program and to test and report on internal
control over compliance in accordance with the Uniform Guidance and the State Single Audit
Implementation Act, but not for the purpose of expressing an opinion on the effectiveness of internal control
over compliance. Accordingly, we do not express an opinion on the effectiveness of the Town of
Hillsborough's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal
program on a timely basis. A material weakness in internal control over compliance is a deficiency or
combination of deficiencies in internal control over compliance, such that there is a reasonable possibility
that material noncompliance with a type of compliance requirement of a federal program will not be
prevented or detected and corrected on a timely basis. A significant deficiency in internal control over
compliance is a deficiency or combination of deficiencies in internal control over compliance with a type of
compliance requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over compliance
that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal
control over compliance that we consider to be material weaknesses. However, material weaknesses may
exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing
of internal control over compliance and the results of that testing based on the requirements of the Uniform
Guidance and the State Single Audit Implementation Act. Accordingly, this report is not suitable for any
other purpose.
Grad,1 LIF
High Point, North Carolina
January 10, 2020
156
Town of Hillsborough, North Carolina Schedule 19
Schedule of Findings and Questioned Costs
Schedule of Findings and Questioned Costs
I. Summary of Auditors' Results
Financial Statements
Type of auditors' report issued on whether the
financial statements audited were prepared in
accordance with GAAP
Unmodified
Internal control over financial reporting:
• Material weaknesses identified? Yes X No
• Significant deficiencies identified that are not
considered to be material weaknesses? Yes X No
Noncompliance material to financial statements
noted? Yes X No
Federal Awards
Internal control over major federal programs:
• Material weaknesses identified? Yes X No
• Significant deficiencies identified that are not
considered to be material weaknesses? Yes X No
• Noncompliance material to federal award Yes X No
Type of auditors' report issued on compliance for
major federal program: Unmodified
Any audit findings disclosed that are required to
be reported in accordance with 2 CFR
200.516(a)? Yes X No
Identification of major federal program:
CFDA Number
20.205
Name of Federal Program or Cluster
Highway Planning and Construction Cluster
Dollar threshold used to distinguish between
Type A and Type B Programs: $750,000
Auditee qualified as a low -risk auditee?
II. Financial Statement Findings
Yes X No
There were no findings related to the financial statements for the fiscal year ended June 30, 2019.
157
Town of Hillsborough, North Carolina Schedule 19
Schedule of Findings and Questioned Costs
III. Federal Awards Findings and Questioned Costs
There were no findings related to the federal awards for the fiscal year ended June 30, 2019.
158
Summary Schedule of Prior Audit Findings
Finding 2018-001: Financial Accounting Closing Procedures
Status: Cleared
Finding 2018-002: Excess of Expenditures over Appropriations
Status: Cleared
159
Town of Hillsborough, North Carolina
Schedule of Expenditures of Federal and State Awards
Year Ended June 3o, 2019
Schedule 21
Grantor/Program Title
Federal awards:
Federal Federal
CFDA/ (Direct and
State Grant Pass -Through) State
Number Number Expenditures Expenditures
U.S. Department of Transportation
Highway Planning and Construction Cluster:
Passed through the NC Department of
Transportation:
Highway Planning and Construction
(Federal Aid Highway Program):
Riverwalk Trail 20.205 46243.1.1 786,287
Total Passed through NC
Department of Transportation 786,287
Total Highway Planning and
Construction Cluster
786,287
U.S. Department of Homeland Security
Passed through N.C. Department of Public
Safety -Emergency Management:
Disaster Grants - Public Assistance
(Presidentially Declared Disasters) 97.036 72748 17,035 5,678
Total Passed through NC
Department of Public Safety -
Emergency Management 17,035 5,678
Total U.S. Department of Homeland
Security 17,035 5,678
Total assistance - federal
programs
State awards:
803,322 5,678
NC Department of Transportation
Direct programs:
Powell Bill DOT -4 2000005097 171,793
Total NC Department of
Transportation 171,793
NC Division of Soil and Water Conservation
Passed through Orange Soil and Water
Conservation District:
Community Conservation Assistance Program NC-CCAP 68-2018-501 6,525
Total NC Division of Soil and Water
Conservation 6,525
Total assistance - state programs 178,318
Total assistance $ 803,322 $ 183,996
160
Town of Hillsborough, North Carolina
Notes to Schedule of Expenditures of Federal and State Awards
Year Ended June 3o, 2019
Notes to Schedule of Expenditures of Federal and State Awards
1. Basis of Presentation
The accompanying Schedule of Expenditures of Federal and State Awards (SEFSA) includes the federal and
state grant activity of the Town of Hillsborough under the programs of the federal government and the State of
North Carolina for the year ended June 30, 2019. The information in this SEFSA is presented in accordance with
the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards and the State Single Audit Implementation Act.
Because the Schedule presents only a selected portion of the operations of the Town it is not intented to and
does not present the financial position, changes in net position, or cash flows of the Town.
2. Summary of Significant Accounting Policies
Expenditures reported in the SEFSA are reported on the modified accrual basis of accounting. Such
expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types
of expenditures are not allowable or are limited as to reimbursement.
The Town of Hillsborough has not elected to use the 10 -percent de minimis indirect cost rate as allowed under
the Uniform Guidance.
161