Cary finance team shows improving revenues but long‑term budget gaps; council to weigh fund‑balance options

Kimberly Branch, Cary’s finance director, gave council a multi‑part financial briefing at the Feb. 20–21 staff retreat that combined recent performance, benchmarks and education on fund‑balance accounting.

Branch said the town’s largest revenue sources remain property tax and sales tax and that, as of the midyear snapshot, revenues were running ahead of expenditures. She highlighted longer‑term trends showing large increases in property tax receipts since 2022 as well as four‑year spending increases tied to downtown park operations, technology investment and debt service.

On reserves, Branch outlined the statutory and accounting categories used in municipal finance — non‑spendable, restricted, committed, assigned and unassigned — and noted Cary’s existing policy which targets 33.33% of budgeted general‑fund expenditures. She and staff emphasized that “available” or “unassigned” fund balance is the clearest measure of what the town can use without legal or accounting restriction; using that metric, Cary’s available balance is substantially lower than the headline total fund‑balance number.

Staff also previewed a five‑year budget model showing the sensitivity of Cary’s finances to recurring cost increases (merit pay, operating‑cost inflation) and capital and debt choices. One model showed that a 5% annual merit program and 3% annual operations inflation, combined with $10 million a year in capital transfers and a $100 million bond issuance scenario, could create multi‑million‑dollar shortfalls over five years unless offset by revenue increases, permanent reductions or judicious use of fund balance.

Council members asked for comparables and for options that reduce the policy target to an available‑funds basis; Branch said staff will develop several fund‑balance options (including using unassigned or available fund‑balance targets) and run the numbers with the town’s financial advisor and rating‑agency expectations. Multiple council members said they prefer “rate smoothing” — spreading any tax increases over several years — rather than a single large jump.

No formal fiscal policy changes were adopted at the retreat; staff will return with scenario analyses and options at March work sessions and in the manager’s recommended budget.