HomeMy WebLinkAboutAgenda - 05-05-2016 - 8-a - FY 2015-16 Third Quarter General Fund Financial Report 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: May 5, 2016
Action Agenda
Item No. 8-a
SUBJECT: FY 2015-16 Third Quarter General Fund Financial Report
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
1. Memorandum - Third Quarter Gary Donaldson, (919) 245-2453
FY2015-16 Financial Report- Period Paul Laughton, (919) 245-2152
Ending March 31, 2016
2. Revenues and Expenditures by
Category Charts
3. North Carolina State Economic
Outlook-March 31
4. Investment Overview and Strategy
PURPOSE: To provide a Third Quarter General Fund Financial Report for the period of July 1,
2015 — March 31, 2016.
BACKGROUND: As part of meeting the periodic financial reporting requirements and providing
timely information in regards to the financial status of the County, staff has developed financial
information related to the FY 2016 Third Quarter General Fund.
FINANCIAL IMPACT: There is no financial impact in receiving this FY2016 Third Quarter
General Fund Financial Report.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is related to this
item:
• GOAL: ENABLE FULL CIVIC PARTICIPATION
Ensure that Orange County residents are able to engage government through voting and
volunteering by eliminating disparities in participation and barriers to participation.
RECOMMENDATION(S): The Manager recommends that the Board receive the FY 2016 Third
Quarter General Fund Financial Report and provide staff with feedback.
Attachment 1 2
ORANGE COUNTY
NORTH CAROLINA
FINANCE a idADMINISTRATIVE SERVICES
Gary Donaldson,CTP,Chief Financial Officer gonaldson(I orangecouotync.gov 200 S.Cameron Street,Hillsborough,NC 27278 I 919.245.2151
MEMORANDUM
To: Board of County Commissioners
From: Gary Donaldson, Chief Financial Officer
Date: April 27, 2016
Re: Third Quarter FY2015-16 Financial Report-Period Ending March 31,2016
The Third Quarter FY2015-16 report represents the Department of Finance and Administrative Services commitment to
providing important financial reporting to you, the County Manager, and our Residents.
The Major Orange County Operating funds are:
• General Fund
• Enterprise Funds (Solid Waste Fund and Sportsplex Fund)
The quarterly report is presented with a detailed comparison of FY2015-16 Budget versus Actual and FY2014-15 Budget
versus Actual indicating year to date revenues and expenditures performance. The primary goal of this quarterly report is
to communicate a concise financial status of the County's major operating funds and delineate variances attributed either
to performance or timing.
Enclosures to this Third Quarter Financial Report include:
• 2016 Economic Outlook Report by Dr. Michael Walden of NC State University
• Investment Overview and Strategy
Our new Investment Strategy is being implemented in collaboration with our financial advisors with the goal of
optimizing investment earnings in view of an improving interest rate environment.
General Fund Performance
The FY2015-16 General Fund performance through the third quarter is on target with the budget and historical financial
performance. General fund revenues through the third quarter are $179.5 million and General fund expenditures are
$153.5 million. The most notable revenue lag is sales tax which accounts for 10% of General fund revenues. The lag is
attributed to the State remittance schedule for local governments.Notwithstanding the sales tax timing variance, there are
no other anticipated General Fund revenue or expenditure items of concern for the fiscal year.
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General Fund Revenues
Third quarter FY2015-16 General Fund revenues total $179.5 million or 84.1% of budgeted revenues,which is nearly$3
million higher than 3Q FY2014-15 total of$176.8 million or 84.9% of budgeted revenues. Property tax revenues accounts
for $2 million of this increase and sales tax revenues accounts for $441, 634 of this increase. Miscellaneous revenues
comprise the remaining increases reflecting Donations, Cardinal Innovations and Medicaid Hold Harmless payments. The
hold harmless payments offset the repeal of Article 44 Sales tax revenues in October 2009.
Summary of Major General Fund Revenues
FY2015-16 FY2015-16 YTD% FY2014-15 FY2014-15 YID
Category Original Budget Revised Budget YTD Actual Collected Category Original Budget Revised Budget YTD Actual Collected
Property Iax $ 147,551,332 $ 147,551,332 $ 144,202,513 97.7% Property Tax 145,714,650 $ 145,714,650 $ 142,228,637 97.6%
Local Option Sales Tax 20,652,132 20,652,132 9,863,998 47.8% Local Option Sales Tax 19,001962 19,001962 9,422,364 49.6%
Licenses and Permits 313,000 313,000 147,767 47.2% Licenses and Permits 313,000 313,000 165,827 53.0%
Charges for Services 10,766,030 10,827,314 7,036,916 65.0% Charges for Services 9,799,005 9,894,038 7,077,171 71.5%
Intergovernmental 15,000,278 19,852,705 12,276,541 61.8% Intergovernmental 13,575486 18992,481 12,837,259 67.6%
Transfers from Other Funds 1,052,600 1,052,600 1,052,600 100.0% Iransfers from Other Funds 1,052,600 1,052,600 1,052,600 100.0%
Investment Earnings 52,500 52,500 89,868 171.2% Investment Earnings 105,000 105,000 7,916 7.50/0
Miscellaneous 737,468 983,184 4,832,176 491.5% Miscellaneous 798,065 910,589 4,009,328 440.3%
Fund Balance Appropriation 10,650,770 12,144,614 - 0.0% Fund Balance Appropriation 10,068343 12,178,019 - 0.0%
Total General Fund Revenues 206,776,110 213,429,381 179,502,379 84.1% Total General Fund Revenues 200,428,111 208,162,339 176,801,102 84.9%
Property Tax Revenues
Property Tax budgeted revenues accounts for 71% of the total General Fund revenue budget. 3Q FY2015-16 Property Tax
revenues total$144.2 million or 97.7% of budgeted revenues,which is $2 million above the 3Q FY2014-15 total of
$142.2 million or 97.6% of budgeted revenues. Real and personal property taxes were due and collected September 1,
with interest and penalties accruing January 2016. The majority of the remaining revenues pertain to Motor Vehicle Tax
revenues which total$7.1 million or 79.4% of budgeted revenues as compared to $7 million or 86.5% of budgeted
revenues. The year-to-date percent of budgeted Property tax revenues difference between fiscal years is due to an increase
in the budgeted amount for Motor Vehicles taxes of$851,000 in FY2015-16. The State assumed responsibility for
collecting Motor Vehicles taxes in mid-2013.
Local Option Sales Tax Revenues
3Q FY2015-16 Sales Tax revenues total$9.8 million or 47.8% of budgeted revenues,which is $441,000 above the 3Q
FY2014-15 Sales Tax revenues of$9.4 million or 49.6%. This reflects seven months of actual collections due to the
timing lag of receipts from the North Carolina Department of Revenue (NCDOR). The local government sales tax
distributions in any given month reflect actual sales made up to three months prior. The March 2016 distribution, as
historically is the case,includes a large number of calendar year end refunds,which results in lower net Sales Tax
revenues. The remaining five NCDOR remittances for FY2015-16 are expected to be received by the County on May 16,
June 15,July 16,August 17, and September 16. The last two payments will be accrued back to fiscal year-end June 30,
2016 consistent with generally accepted accounting principles for revenue recognition. Sales tax revenue is not a straight-
lined monthly item with higher receipts projected during the last quarter of the fiscal year and correlated with increased
economic activity and taxable sales.
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The passage of HB 117 which expands the sales tax base to include specific services including advertising,veterinary and
pet care services, and repairs and maintenance work on personal property such as automobiles is projected to increase
County sales tax revenues by approximately$263,000.
The North Carolina Department of Revenue administers the following disbursement of local option sales taxes recorded in
the County's General Fund:
• Article 39 (one-cent) -authorized in 1971, and is currently allocated on a point of delivery basis.
• Article 40 (half-cent) -authorized in 1983, and it is currently allocated on a per capita basis; based upon the
county's population in relation state population total.
• Article 42 (half-cent) -authorized in initially in 1986,the allocation changed from per capita to a point of delivery
basis.
Note: Article 46(quarter-cent) -authorized in 2012 is accounted for in a Special Revenue Fund, and not the General
Fund. The allocation is on a point of sale basis.
Charges for Services
3Q FY2015-16 Charges for Services total $7 million or 65% of budgeted revenues, as compared with 3Q FY2014-15 total
of$7 million or 71.5%of budgeted revenues with actual collections in FY2015-16. The year-to-date percent of budgeted
revenues collected difference between fiscal years is due to an increase in the budgeted amount for Charges for Services
of$1 million in FY2015-16 and a lower rate of collections in Emergency Services. Charges for Services consists of
various departmental fees for services including Planning and Inspections, Environment,Agriculture, Parks and
Recreation,Aging, Sheriff's Office, Emergency Services, and Register of Deeds. Planning and Inspections fees total$1
million or 94% of budgeted revenues reflecting increased construction and permitting activity as compared to $893,954
or 124% of budgeted revenues in the prior year. The prior year budget reflects a conservative budget combined with
increased activity.
Intergovernmental Revenues
3Q FY2015-16 Intergovernmental revenues total $12.2 million or 61.8% of budgeted revenues, as compared to 3Q
FY2014-15 total of revenues of$12.8 million or 67.6%of budgeted revenues. The $600,000 decrease represents a timing
variance between fiscal years, and is due primarily to lower DSS revenues of$324,673 and lower Child Support revenues
of$196,611. Intergovernmental revenues also includes revenue from local governments include contracts with the Towns
of Chapel Hill, Carrboro, and Hillsborough for animal control services, and tax collection services. The Department of
Social Services (DSS)receives 64% of the annual budgeted revenues; DSS revenue includes Federal Medicaid and Work
First revenues.
General Fund Expenditures
3Q FY2015-16 General Fund expenditures total$153.3 million or 71.9% of budgeted expenditures, as compared with 3Q
FY2014-15 total expenditures of$147.7 million or 70.7% of budgeted expenditures,with actual expenditures in FY2015-
16 $5.6 million more than FY2014-15 expenditures. The overall General fund increase of 1.2%in 3QFY2015-16 is
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attributed to increased expenditures of approximately$1.4 million in Current Expense funding for Schools, $1.2 million in
Non-Departmental of which $993,878 is in Human Services representing a timing variance for the payments for School
Nurses. (See Functional Leadership Teams below for more detail).
Summary of Major General Fund Expenditures
FY2015-16 FY2015-16 YID% FY2014-15 FY2014-15 YTD
Category Original Budget Revised Budget YTD Actual Expended Category Original Budget Revised Budget YTD Actual Expended
Community Services $ 10,568530 $ 10,735,350 $ 7,169,065 66.8% Community Services 9,706,823 $ 9908,418 $ 6,854,540 69.2%
General Government 7,761,418 7,891,073 5,518,339 69.9% General Government 7,052,986 7,148,018 5,083,518 71.1%
Public Safety 22915,823 23,134,660 16,001,528 69.2% Public Safety 22,021,055 22204,195 15,112,109 68.1%
Human Services 33941247 38,752,635 27,575,227 71.2% Human Services 32,016,307 37,406,013 26581,349 71.1%
Education 78,837341 78,837,341 58,944113 74.8% Education 76,847,414 76,847,414 57,411,137 74.7%
Support Services 11,726,879 11,995,293 8,736,016 72.8% Support Services 11,087,403 11,343,016 8,436,352 74.4%
Non-Departmental 41,024,872 42,083,029 29,439,017 70.0% Non-Departmental 41,696,123 44,080,743 28,236,624 64.1%
General Fund Expenditures 206,776,110 213,429,381 153,383,305 71.9% General Fund Expenditures 200,428,111 208,937,817 147,715,629 70.7%
Please note that the reporting of Budget versus Actual expenditures is categorized by the Manager's Functional
Leadership Teams:
Community Services -Animal Services,NC Cooperative Extension, DEAPR, Economic Development,Planning and
Inspections/Orange Public Transportation.
3Q FY2015-16 General Fund expenditures total $7.1 million or 66.8%as compared with 3QFY2014-15 Community
Services expenditures of$6.8 million or 69.2%,with actual expenditures in FY2015-16 exceeding FY2014-15
expenditures by$314,525. The increase in expenditures is attributed to increases in Economic Development of$102,176
due to the filling of vacant positions as compared to a higher level of vacancies in the prior fiscal year. The remaining
increases are attributed to increases in Planning/Inspections Department and Orange Public Transportation(OPT) due to
increases in additional OPT staff approved by the Board during the FY2015-16 Budget adoption and an increase in the
Contract Services account within the Operating expenditures.
General Government- Board of Elections, Clerk to the Board, County Attorney, County Manager,Register of Deeds
and Tax Administration
3Q FY2015-16 General Government expenditures total $5.5 million or 69.9% of budgeted expenditures, as compared
with 3Q FY2014-15 total of$5 million or 71.1% of budgeted expenditures. The 1.2%variance between fiscal years is due
to an increase in the budgeted amount for Board of Elections associated with the additional elections and staffing for the
polls. The increase in actual expenditures are attributed to a $226,503 increase in the County Manager's Office resulting
from the transfer of the Pre-Trial Services and Drug Treatment Court programs from the Department of Social Services
(DSS)to the Manager's Office in FY2015-16. The Tax Administration office accounts for the remaining increases.
Public Safety-Courts, Emergency Services, and Sheriff's Office
3Q FY2015-16 Public Safety expenditures total $16 million or 69.2% of budgeted expenditures, as compared with 3Q
FY2014-15 total of$15.1 million or 68.1% of budgeted expenditures. The 1.1%variance between fiscal years is due to an
increase of$468,636 attributed to an increase in Emergency Services Personnel Services accounts; due to having fewer
vacancies within the Communications division,but still requiring significant Temporary Personnel hours to ensure proper
coverage and an increase in the Contract Services and an increase in the Medical Supplies operating accounts.
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Human Services—Department on Aging, Child Support, Housing, Human Rights, and Community Development,
Library,Public Health and Social Services
3Q FY2015-16 Human Services expenditures total$27.5 million or 71.2% of budgeted expenditures, as compared with
3Q FY2014-15 total of$26.5 million or 71.1%of budgeted expenditures. The majority of the increase through the third
quarter is associated with Health Department expenditures due to an increase in the Personnel Services accounts and
fewer vacancies within the department and an increase in the amount of Non-Permanent Personnel expenditures.
Additionally, the Health Department has an increase within its Operating accounts,primarily driven by the Contract
Services account and the inclusion of the Family Success Alliance account in FY2015-16. The Department of Social
Services comprises more than 50% of the Human Services budget and its expenditures are attributed to the renovations to
the former Dollar Tree site, child day care, and less staff vacancies.
Support Services-Asset Management Services, Community Relations,Finance, Human Resources, and Information
Technology
3Q FY2015-16 Support Services expenditures total$8.7 million or 72.8% of budgeted expenditures, as compared with 3Q
FY2014-15 total of$8.4 million or 74.4% of budgeted expenditures. The majority of the increase through the third quarter
is associated with Information Technology expenditures increases of 3.7% or $299,854 most of which is the result of
filling vacant positions.
Education
3Q FY2015-16 Education expenditures total$58.9 million or 74.8% of budgeted expenditures, as compared with 3Q
FY2014-15 total of$57.4 million or 74.7% of budgeted expenditures. The FY2015-16 Education budget was increased by
$1.9 million over the prior year's budget, and the County has remitted amounts commensurate with the prior year. The
Education expenditures are comprised of Current Expenses to the Chapel Hill-Carrboro City School District and Orange
County School District. Current Expenses of$55.5 million or 75% of budgeted expenditures was remitted to the school
districts through the Third quarter; this was $1.4 million more than the same period in FY2014-15. The remaining
Education budget pertains to Fair Funding, Recurring Capital, and Other Related County Support, specifically support to
Durham Technical College (Orange County campus).
Non-Departmental
3Q FY2015-16 Non-Departmental expenditures total$29.4 million or 70% of budgeted expenditures, as compared with
3Q FY2014-15 total of$28.2 million or 64.1% of budgeted expenditures. The 5.9%variance between fiscal years is due
to increased expenditures in Current Expense funding for Schools and $1.2 million in Non-Departmental of which
$993,878 is in Human Services representing a timing variance for the payments for School Nurses. The payments in
FY2014-15 were not made during the first and second quarters.
In summary, 3Q FY2015-16 General Fund Revenues and Expenditures are in line with the adopted FY2015-16 General
Fund Budget.
Enterprise Funds Performance
Solid Waste Fund
3Q FY2015-16 Solid Waste Fund performance is in line with the adopted FY2015-16 budget. Third quarter revenues are
$9 million or 73.7% of budgeted revenues and expenses are $8.4 million or 68.8% of budgeted expenses. This compares
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with FY2014-15 Third quarter revenues of$6.7 million or 51.6% of budgeted revenues and expenses of$10.5 million or
65.9% of budgeted expenses. The FY2014-15 higher expenses were attributed to landfill closure costs,while the increase
in revenues in FY2015-16 is attributed to increased collections from the $107 Solid Waste Programs fee.
Sportsplex Fund
3Q FY2015-16 Sportsplex Fund performance is consistent with the adopted FY2015-16 budget. The revenue stream is
comprised of Ice Rink-34% of budgeted revenues, Membership and Fitness-32% of budgeted revenues,with the
remaining revenues comprised primarily of Aquatic and Kidsplex. Third quarter revenues are $2.5 million or 78% of
budgeted revenues and expenses are $2.9 million or 84.2% of expenses. This compares with FY2014-15 third quarter
revenues of$2.7 million or 66.7% of budgeted revenues and expenses of$3.5 million or 63.4% of budgeted expenses.
The increase in expenses in FY2014-15 was attributed to the lobby and locker room renovations project.
Enclosures
Attachment 2 8
Revenue by Category(Month 9)
Summary-General Fund
FY2015-16 FY2014-15 FY15-16 FY14-15 FY15-16 vs.FY14-15 Variance
YTD% YTD
Original Budget Revised Budget YTD Actual Collected Original Budget Revised Budget YTD Actual Collected Monthly Actual Monthly Actual March %Variance YTD %Variance
Property Taxes
Property Taxes 136,413,322 136,413,322 135,573,059 99.4% 135,734,649 135,734,649 133,554,580 98.4% 821,521 855,426 (33,905) -4.0% 2,018,479 1.5%
Motor Vehicles 8,953,010 8,953,010 7,111,675 79.4% 8,102,271 8,102,271 7,005,461 86.5% 838,716 820,861 17,855 2.2% 106,214 1.5%
Gross Receipts 55,000 55,000 49,450 89.9% 45,000 45,000 55,212 122.7% 4,572 5,430 (858) -15.8% (5,762) -10.4%
Delinquent Taxes 1,150,000 1,150,000 912,306 79.3% 994,130 994,130 978,672 98.4% 108,444 90,922 17,522 19.3% (66,366) -6.8%
Interest on Delinquent Taxes 450,000 450,000 325,651 72.4% 350,000 350,000 383,947 109.7% 65,473 59,473 6,000 10.1% (58,296) -15.2%
Late List Penalties 75,000 75,000 89,009 118.7% 60,000 60,000 104,113 173.5% 4,227 4,173 54 1.3% (15404) -14.5%
Animal Taxes 200,000 200,000 141,363 70.7% 205,000 205,000 146,652 71.5% 16,511 19,100 (2,589) -13.6% (5,289) -3.6%
Beer and Wine 255,000 255,000 0 0.0% 223,600 223,600 0 0.0% 0 0 0 0.0% 0 0.0%
Property Taxes Total 147,551,332 147,551,332 144,202,513 97.7% 145,714,650 145,714,650 142,228,637 97.6% 1,859,464 1,855,385 4,079 0.2% 1,973,876 1.4%
Sales Tax
Article 39 One Cent 9,429,650 9,429,650 4,295,866 45.6% 8,667,512 8,667,512 4,085,069 47.1% 930,157 917,746 12,411 1.4% 210,797 5.2%
Article 40 Half Cent 6,489,632 6,489,632 3,409,407 52.5% 5,994,861 5,994,861 3,280,748 54.7% 664,839 635,302 29,537 4.6% 128,659 3.9%
Article 42 Half Cent 4,732,850 4,732,850 2,158,725 45.6% 4,339,589 4,339,589 2,056,547 47.4% 466,520 460,559 5,961 1.3% 102,178 5.0%
Sales Tax Total 20,652,132 20,652,132 9,863,998 47.8% 19,001,962 19,001,962 9,422,364 49.6% 2,061,516 2,013,607 47,909 2.4% 441,634 4.7%
Licenses and Permits
Privilege License 13,000 13,000 2,062 15.9% 13,000 13,000 5,868 45.1% 135 3,135 (3,000) -95.7% (3,806) -64.9%
Franchise Fee 300,000 300,000 145,705 48.6% 300,000 300,000 159,959 53.3% 69,825 79,314 0 -12.0% 0 -8.9%
Licenses and Permits Total 313,000 313,000 147,767 47.2% 313,000 313,000 165,827 53.0% 69,960 82,449 (3,000) -15.1% (3,806) -10.9%
Charges for Services
Aging 67,100 110,100 85,150 77.3% 67,100 95,068 82,400 86.7% 10,163 11,507 (1,344) -11.7% 2,750 3.3%
Animal Services 193,100 194,300 131,520 67.7% 197,800 197,800 135,335 68.4% 15,334 14,851 483 3.3% (3,815) -2.8%
Asset Management 1,156 1,156 1,523 131.7% 600 600 723 120.5% 345 210 135 64.3% 800 110.7%
Board Of Elections 54,495 54,495 58,607 107.5% 100 100 113 113.0% 0 0 0 #DIV/0! 58,494 51764.6%
Child Support 1,100 1,100 885 80.5% 1,100 1,100 1,181 107.4% 100 100 0 0.0% (296) -25.1%
Cooperative Extension 20,000 31,000 46,569 150.2% 20,000 37,650 32,835 87.2% 9,080 15 9,065 60433.3% 13,734 41.8%
DEAPR 317,823 317,823 304,908 95.9% 279,858 295,558 296,007 100.2% 47,108 60,333 (13,225) -21.9% 8,901 3.0%
Emergency Services 2,490,215 2,490,215 1,446,394 58.1% 2,240,215 2,240,215 1,800,758 80.4% 166,499 225,604 (59,105) -26.2% (354,364) -19.7%
General Revenue 472,798 472,798 0 0.0% 472,798 472,798 0 0.0% 0 0 0 #DIV/0! 0 #DIV/0!
Health 1,588,127 1,594,211 1,148,510 72.0% 1,364,166 1,385,666 1,044,811 75.4% 160,753 144,596 16,157 11.2% 103,699 9.9%
Library 29,850 29,850 19,829 66.4% 29,850 29,850 17,970 60.2% 3,047 1,629 1,418 87.0% 1,859 10.3%
OPT 114,500 114,500 54,291 47.4% 96,500 96,500 64,948 67.3% 15,634 7,404 8,230 111.2% (10,657) -16.4%
Planning&Inspections 1,065,865 1,065,865 1,004,995 94.3% 707,330 719,545 893,954 124.2% 116,858 94,005 22,853 24.3% 111,041 12.4%
Register Of Deeds 1,355,500 1,355,500 1,121,796 82.8% 1,393,687 1,393,687 1,061,056 76.1% 139,060 121,848 17,212 14.1% 60,740 5.7%
Sheriff 2,615,700 2,615,700 1,332,547 50.9% 2,591,700 2,591,700 1,363,883 52.6% 382,728 204,070 178,658 87.5% (31,336) -2.3%
Tax 378,701 378,701 279,392 73.8% 336,201 336,201 281,197 83.6% 4,062 2,071 1,991 96.1% (1,805) -0.6%
Charges for Services Total 10,766,030 10,827,314 7,036,916 65.0% 9,799,005 9,894,038 7,077,171 71.5% 1,070,771 888,243 182,528 20.5% (40,255) -0.6%
Intergovernmental
Aging 532,367 585,991 340,891 58.2% 541,480 645,649 380,756 59.0% 53,891 86,459 (32,568) -37.7% (39,865) -10.5%
Animal Services 218,218 222,162 134,270 60.4% 200,493 200,493 123,233 61.5% 0 0 0 #DIV/0! 11,037 9.0%
Child Support 1,318,075 1,318,075 721,050 54.7% 1,270,000 1,270,000 917,661 72.3% 121,953 139,054 (17,101) -12.3% (196,611) -21.4%
County Debt Svc-Revs 0 0 0 0.0% 42,991 42,991 26,775 62.3% 0 26,775 (26,775) -100.0% (26,775) -100.0%
County Manager 0 25,000 6,111 0.0% 0 0 0 100.0% 529 0 529 #DIV/0! 6,111 6110900.0%
DEAPR 132,838 135,728 53,371 39.3% 126,717 130,522 78,759 60.3% 0 74,954 (74,954) -100.0% (25,388) -32.2%
Emergency Services 0 1,101 1,101 100.0% 0 0 0 0.0% 0 0 0 0.0% 1,101 #DIV/0!
General Revenue 400,000 400,000 300,000 75.0% 400,000 400,000 300,000 75.0% 100,000 100,000 0 0.0% 0 0.0%
Health 973,772 1,072,263 724,818 67.6% 871,740 926,575 702,364 75.8% 76,393 111,043 (34,650) -31.2% 22,454 3.2%
Information Technologies 19,645 19,645 0 0.0% 19,645 19,645 12,235 62.3% 0 12,235 (12,235) -100.0% (12,235) -100.0%
Library 100,000 123,480 83,243 67.4% 100,000 105,976 77,541 73.2% 9,085 7,829 1,256 16.0% 5,702 7.4%
OPC Mental Health 40,000 40,000 34,778 86.9% 40,000 40,000 29,874 74.7% 4,181 3,993 188 4.7% 4,904 16.4%
OPT 844,100 844,100 290,198 34.4% 611,647 611,647 403,274 65.9% 10,776 43,436 (32,660) -75.2% (113,076) -28.0%
Planning&Inspections 24,024 24,024 10,309 42.9% 0 24,024 7,684 32.0% 0 0 0 0.0% 2,625 34.2%
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Public Safety Non-Deptl 277,731 277,731 208,260 75.0% 277,731 277,731 208,287 75.0% 23,140 23,143 (3) 0.0% (27) 0.0%
Lottery Proceeds 0 916,135 916,135 100.0% 0 616,517 835,292 135.5% 0 616,517 (616,517) -100.0% 80,843 9.7%
Sheriff 364,469 364,469 38,202 10.5% 184,469 184,469 9,924 5.4% 950 1,461 (511) -35.0% 28,278 284.9%
Social Services 9,709,839 13,437,601 8,386,109 62.4% 8,843,373 13,451,042 8,710,782 64.8% 1,151476 1,353,143 (201,967) -14.9% (324,673) -3.7%
Tax 45,200 45,200 27,696 61.3% 45,200 45,200 12,818 28.4% 0 0 (0) -100.0% 14,878 116.1%
Intergovernmental Total 15,000,278 19,852,705 12,276,541 61.8% 13,575,486 18,992,481 12,837,259 67.6% 1,552,075 2,600,042 (1,047,968) -40.3% (560,718) -4.4%
Transfers from Other Funds
Impact Fees 1,040,000 1,040,000 1,040,000 100.0% 1,040,000 1,040,000 1,040,000 100.0% 0 0 0 0.0% 0 0.0%
Other 12,600 12,600 12,600 100.0% 12,600 12,600 12,600 100.0% 0 0 0 0.0% 0 0.0%
Transfers from Other Funds Total 1,052,600 1,052,600 1,052,600 100.0% 1,052,600 1,052,600 1,052,600 100.0% 0 0 0 0.0% 0 0.0%
Investment Earnings Total 52,500 52,500 89,868 171.2% 105,000 105,000 7,916 7.5% 67,859 4,190 63,669 1519.5% 81,952 1035.3%
Miscellaneous Total 737,468 951,984 4,832,176 507.6% 798,065 910,589 4,009,328 440.3% 5,346,736 5,170,780 175,956 3.4% 822,848 20.5%
Appropriated Fund Balance Total 10,650,770 12,144,614 0 0.0% 10,068,343 12,178,019 0 0.0% 0 0 0 0.0% 0 0.0%
Total General Fund Revenue 206,776,110 213,398,181 179,502,379 84.1% 200,428,111 208,162,339 176,801,102 84.9% 12,028,381 12,614,697 (586,316) -4.6% 2,701,277 1.5%
10
Expenditures by Functional Leadership Team(Month 9)
Summary-General Fund
FY2015-16 FY2014-15 FY15-16 FY14-15 FY15-16 vs.FY14-15 Variance
YTD% YTD% Monthly Monthly
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended Actual Actual March %Variance YTD %Variance
Community Services
Animal Services 1,958,791 1,988,141 1,381,851 69.5% 1,884,793 1,897,793 1,297,540 68.4% 145,875 136,659 9,216 6.7% 84,311 6.5%
Cooperative Extension 379,843 390,843 233,086 59.6% 367,972 385,622 242,650 62.9% 27,170 26,851 319 1.2% (9,564) -3.9%
Department of Environment,
Agriculture,Parks&Recreation 3,464,888 3,522,342 2,432,073 69.0% 3,177,359 3,251,475 2,392,758 73.6% 255,898 257,048 (1,150) -0.4% 39,315 1.6%
Economic Development 515,575 519,421 370,487 71.3% 511,710 520,276 268,311 51.6% 37,657 27,261 10,396 38.1% 102,176 38.1%
Planning&Inspections 4,124,325 4,189,495 2,656,374 63.4% 3,639,881 3,728,145 2,558,087 68.6% 285,462 273,636 11,826 4.3% 98,287 3.8%
Recreation Municipal 125,108 125,108 95,194 76.1% 125,108 125,108 95,194 76.1% 0 0 (0) -100.0% 0 0.0%
Community Services Total 10,568,530 10,735,350 7,169,065 66.8% 9,706,823 9,908,418 6,854,540 69.2% 752,062 721,455 30,607 4.2% 314,525 4.6%
General Government
Board of County
Commissioners 870,355 870,930 612,687 70.3% 830,578 833,278 587,044 70.4% 60,587 52,093 8,494 16.3% 25,643 4.4%
Board of Elections 1,063,148 1,063,148 647,740 60.9% 694,173 724,977 555,124 76.6% 193,965 41,814 152,151 363.9% 92,616 16.7%
County Attorney's Office 551,501 551,501 395,768 71.8% 541,000 541,000 398,059 73.6% 42,949 42,165 784 1.9% (2,291) -0.6%
County Manager's Office 856,037 912,237 637,681 69.9% 722,580 722,580 411,178 56.9% 72,758 42,886 29,872 69.7% 226,503 55.1%
Register of Deeds 924,165 924,165 668,122 72.3% 903,025 903,025 661,672 73.3% 72,367 61,251 11,116 18.1% 6,450 1.0%
Tax Administration 3,496,212 3,569,092 2,556,341 71.6% 3,361,630 3,423,158 2,470,441 72.2% 253,393 298,374 (44,981) -15.1% 85,900 3.5%
General Government Total 7,761,418 7,891,073 5,518,339 69.9% 7,052,986 7,148,018 5,083,518 71.1% 696,019 538,583 157,436 29.2% 434,821 8.6%
Public Safety
Courts 90,655 90,655 30,784 34.0% 81,655 81,655 20,392 25.0% 610 3,172 (2,562) -80.8% 10,392 51.0%
Emergency Services 10,146,314 10,234,652 6,905,433 67.5% 9,924,769 9,987,078 6,436,797 64.5% 661,590 648,188 13,402 2.1% 468,636 7.3%
Sheriff 12,678,854 12,809,353 9,065,311 70.8% 12,014,631 12,135,462 8,654,920 71.3% 932,727 902,727 30,000 3.3% 410,391 4.7%
Public Safety Total 22,915,823 23,134,660 16,001,528 69.2% 22,021,055 22,204,195 15,112,109 68.1% 1,594,927 1,554,087 40,840 2.6% 889,419 5.9%
Human Services
Child Support Services 965,640 965,640 697,669 72.2% 967,092 967,092 662,201 68.5% 72,443 71,798 645 0.9% 35,468 5.4%
Department of Social Services 18,153,438 22,573,449 15,980,396 70.8% 17,196,401 22,227,653 15,657,383 70.4% 1,808,454 1,745,393 63,061 3.6% 323,013 2.1%
Department on Aging 1,996,088 2,162,095 1,522,210 70.4% 1,896,783 2,123,542 1,470,608 69.3% 180,001 172,272 7,729 4.5% 51,602 3.5%
Health Department 8,600,516 8,794,656 6,273,605 71.3% 7,910,226 8,026,580 5,736,737 71.5% 684,647 623,851 60,796 9.7% 536,868 9.4%
Housing,Human Rights,&
Community Development 218,823 218,823 152,490 69.7% 210,279 210,279 163,875 77.9% 16,626 17,617 (991) -5.6% (11,385) -6.9%
Library Services 2,081,930 2,113,160 1,505,073 71.2% 1,910,714 1,926,055 1,446,761 75.1% 142,057 194,150 (52,093) -26.8% 58,312 4.0%
Library Municipal 568,839 568,839 426,804 75.0% 568,839 568,839 426,804 75.0% 0 0 (0) -100.0% 0 0.0%
OPC Area Program 1,355,973 1,355,973 1,016,980 75.0% 1,355,973 1,355,973 1,016,980 75.0% 0 0 (0) -100.0% 0 0.0%
Human Services Total 33,941,247 38,752,635 27,575,227 71.2% 32,016,307 37,406,013 26,581,349 71.1% 2,904,228 2,825,081 79,147 2.8% 993,878 3.7%
Education
Current Expenses 74,097,466 74,097,466 55,573,099 75.0% 72,147,134 72,147,134 54,110,351 75.0% 6,174,789 6,012,261 162,528 2.7% 1,462,748 2.7%
Fair Funding 988,000 988,000 557,108 56.4% 988,000 988,000 516,576 52.3% 0 262,393 (262,393) -100.0% 40,532 7.8%
Other Related County Support 751,875 751,875 563,906 75.0% 712,280 712,280 534,210 75.0% 62,656 59,357 3,300 5.6% 29,696 5.6%
Recurring Capital 3,000,000 3,000,000 2,250,000 75.0% 3,000,000 3,000,000 2,250,000 75.0% 250,000 250,000 0 0.0% 0 0.0%
Education Total 78,837,341 78,837,341 58,944,113 74.8% 76,847,414 76,847,414 57,411,137 74.7% 6,487,445 6,584,011 (96,566) -1.5% 1,532,976 2.7%
Support Services
Asset Management Services 4,295,957 4,508,428 3,332,145 73.9% 4,135,662 4,331,917 3,220,399 74.3% 346,111 232,567 113,544 48.8% 111,746 3.5%
Community Relations 188,716 189,941 127,248 67.0% 186,028 194,618 143,129 73.5% 13,187 14,955 (1,768) -11.8% (15,881) -11.1%
Finance&Administrative
Services 3,401,850 3,418,120 2,426,248 71.0% 3,364,117 3,368,807 2,544,398 75.5% 115,691 175,638 (59,947) -34.1% (118,150) -4.6%
Human Resources 945,127 951,961 603,904 63.4% 780,016 785,602 581,809 74.1% 68,753 64,996 3,757 5.8% 22,095 3.8%
Information Technologies 2,895,229 2,926,843 2,246,471 76.8% 2,621,580 2,662,072 1,946,617 73.1% 203,735 165,440 38,295 23.1% 299,854 15.4%
Support Services Total 11,726,879 11,995,293 8,736,016 72.8% 11,087,403 11,343,016 8,436,352 74.4% 747,477 653,596 93,881 14.4% 299,664 3.6%
11
Non-Departmental
Culture&Recreation 90,294 90,294 55,553 61.5% 91,374 91,374 59,380 65.0% 5,780 10,026 (4,246) -1.2% (3,827) -6.4%
Community&Environment 234,425 279,960 223,402 79.8% 219,651 295,959 209,738 70.9% 9,288 2,434 6,854 6.7% 13,664 6.5%
General Services 1,735,518 1,735,518 1,487,489 85.7% 1,871,543 1,871,543 1,565,541 83.6% 21430 176,091 (154,961) -88.0% (78,052) -5.0%
Governing&Management 4,046,062 4,062,071 902,363 22.2% 5,105,948 5,124,208 823,695 16.1% 104,960 73,527 31,433 42.8% 78,668 9.6%
Human Services 2,462,315 2,464,837 1,303,592 52.9% 2,337,980 2,427,980 537,422 22.1% 6,700 33,800 (27,100) 5.3% 766,170 142.6%
Public Safety 401,052 401,052 281,990 70.3% 361,052 361,052 280,879 77.8% 37,422 50,655 (13,233) 11.1% 1,111 0.4%
Debt Service 26,913,693 26,913,693 19,251,920 71.5% 26,529,306 26,529,306 18,921,683 71.3% 3,824,485 3,209,167 615,318 1.4% 330,237 1.7%
Transfers to Other Funds 5,141,513 6,135,604 5,932,708 96.7% 5,179,269 7,379,321 5,838,286 79.1% 0 0 0 -0.7% 94,422 1.6%
Non-Departmental Total 41,024,872 42,083,029 29,439,017 70.0% 41,696,123 44,080,743 28,236,624 64.1% 4,009,765 3,555,700 454,065 12.8% 1,202,393 4.3%
Total Expenditures 206,776,110 213,429,381 153,383,304 71.9% 200,428,111 208,937,818 147,715,629 70.7% 17,191,923 16,432,513 759,410 4.6% 5,667,676 3.8%
*YTD Actuals include Encumbrances
12
Revenues and Expenditures(Month 9)
Summary-Solid Waste Enterprise Fund
FY2015-16 FY2014-15 FY15-16 FY14-15 FY15-16 vs.FY14-15 Variance
YTD% YTD% Monthly Monthly
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended Actual Actual March %Variance YTD %Variance
Revenues
Charges for Services 7,805,439 7,805,439 7,323,312 93.8% 5,264,960 5,264,960 5,063,173 96.2% 177,225 171,671 5,554 3.2% 2,260,139 44.6%
General Govt Revenue 1,840,518 2,793,360 1,467,697 52.5% 4,459,272 4,525,416 1,467,839 32.4% 11,419 156,793 (145,374) -92.7% (142) 0.0%
Intergovernmental 353,000 353,000 278,438 78.9% 601,925 601,925 224,777 37.3% 5,259 3,883 1,376 35.4% 53,661 23.9%
Contribution from Equipment Reserves 1,362,061 1,362,061 0 0.0% 2,696,893 2,696,893 0 0.0% 0 0 0 0.0% 0 0.0%
Revenues Total 11,361,018 12,313,860 9,069,447 73.7% 13,023,050 13,089,194 6,755,789 51.6% 193,903 332,347 (138,444) -41.7% 2,313,658 34.2%
Expenditures
Personnel 3,822,663 3,822,663 2,741,266 71.7% 3,558,815 3,558,815 2,545,109 71.5% 290,984 267,565 23,419 8.8% 196,157 7.7%
Operations 5,296,743 5,896,153 4,256,430 72.2% 5,231,847 6,018,853 5,013,066 83.3% 467,952 331,378 136,574 41.2% (756,636) -15.1%
Recurring Capital 1,244,137 1,597,569 1,479,457 92.6% 3,268,389 5,460,133 2,981,058 54.6% 554,775 2,012 552,763 27473.3% (1,501,601) -50.4%
Contribution to Equipment Reserves 997,475 997,475 0 0.0% 963,999 963,999 0 0.0% 0 0 0 0.0% 0 0.0%
Expenditures Total 11,361,018 12,313,860 8,477,153 68.8% 13,023,050 16,001,800 10,539,233 65.9% 1,313,711 600,955 712,756 118.6% (2,062,080) -19.6%
*YTD Actuals include Encumbrances
13
Revenues and Expenditures(Month 9)
Summary-Sportsplex Fund
FY2015-16 FY2014-15 FY15-16 FY14-15 FY15-16 vs.FY14-15 Variance
YTD% YTD% Monthly Monthly
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended Actual Actual March %Variance YTD %Variance
Revenues
Charges for Services
Ice Rink 1,115585 1,115,385 984,434 88.3% 1,126560 1,126,360 926,123 82.2% 102546 59,084 43,462 73.6% 58511 6.3%
Aquatic 436,000 436,000 360,020 82.6% 327,400 327,400 334512 102.3% 46,965 57,415 (10,450) -18.2% 25,108 7.5%
Kidsplex 384,010 384,010 291574 76.0% 412500 412,800 281,040 68.1% 46,073 36,747 9,326 25.4% 10,834 3.9%
Membership and Fitness 1,051528 1,051528 767519 73.0% 970500 970,300 718540 74.1% 80,641 85761 (5,120) -6.0% 48,779 6.8%
Other Income 183,077 183,077 153,261 83.7% 192,950 192,950 138,058 71.6% 14,481 10,465 4,016 38.4% 15,203 11.0%
Charges for Services Total 3,170,000 3,170,000 2,556,908 80.7% 3,029,810 3,029,810 2,398,673 79.2% 290,706 249,472 41,234 16.5% 158,235 6.6%
Appropriated Fund Balance Total 106,278 106,278 0 0.0% 202,926 752,926 0 0.0% 0 0 0 0.0% 0 0.0%
Equipment Financing Proceeds Total 0 0 0 100.0% 0 950,000 0 0.0% 0 0 0 0.0% 0 0.0%
Transfer from General Fund Total 0 0 0 100.0% 376,450 376,450 376,450 100.0% 0 0 0 0.0% 0 -100.0%
Revenues Total 3,276,278 3,276,278 2,556,908 78.0% 3,609,186 4,159,186 2,775,123 66.7% 290,706 249,472 41,234 16.5% 158,235 -7.9%
Expenditures
Personnel 1,177,868 1,177,868 877,566 74.5% 1,147,706 1,147,706 792,204 69.0% 117,223 84,433 32,790 38.8% 85,362 10.8%
Operations 2,098,410 2,120,081 1,845,475 87.0% 2,041,480 2,063,151 2,048,144 99.3% 613,012 412,997 200,015 48.4% (202,669) -9.9%
Recurring Capital 0 201,094 224,230 111.5% 420,000 2,349,246 686,632 29.2% 0 43,056 (43,056) -100.0% (462,402) -67.3%
Expenditures Total 3,276,278 3,499,042 2,947,271 84.2% 3,609,186 5,560,103 3,526,980 63.4% 730,235 540,486 189,749 35.1% (579,709) -16.4%
*YTD Actuals include Encumbrances
Attachment 3 14
cfe NC STATE
THE NORTH CAROLINA ECONOMIC OUTLOOK
FIRST QUARTER 2016
Prepared by Dr. Michael L. Walden, William Neal Reynolds Distinguished Professor,
Department of Agricultural and Resource Economics,North Carolina State University
Contact Methods: phone: 919-515-4671; e-mail: michaelwalden @ncsu.edu
EIGHT NORTH CAROLINA ECONOMIC HEADLINES FOR 2016
1. GROWTH WILL CONTINUE: STATE REAL GROSS DOMESTIC PRODUCT WILL RISE
3.5%, FASTER THAN THE NATIONAL RATE
2. 90,000 NET NEW PAYROLL JOBS WILL BE ADDED
3. "HEADLINE"JOBLESS RATE WILL FALL TO 5.1%BY YEAR'S END
4. FASTEST JOB GROWTH WILL BE IN HIGHER-PAYING FINANCIAL,INFORMATION,
AND PROFESSIONAL/BUSINESS SECTORS BUT ALSO IN L O WER-PAYING
LEISURE/HOSPITALITY AND PERSONAL SERVICE SECTORS
5. "HEADLINE"JOBLESS RATE WILL FALL TO UNDER 5%IN ASHEVILLE,
BURLINGTON, CHARLOTTE,DURHAM,RALEIGH, WILMINTON,AND WINSTON-
SALEM
6. "HEADLINE"JOBLESS RATE WILL BE NEAR OR ABOVE 6%IN FAYETTEVILLE,
ROCKY MOUNT,AND RURAL NORTH CAROLINA
7. BIGGEST ECONOMC"PLUS" WLL BE FROM IMPROVED HOUSEHOLD FORMATION
GENERATING NEW SPENDING
8. BIGGEST ECONOMIC"MINUS" WILL BE FROM THE END TO OIL AND GASOLINE
PRICE DROPS—STILL, THOSE PRICES WILL REMAIN AFFORDABLE
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Executive Summary: A Turning Point in the Economy
2015 represented a turning point for the current economy. After delaying for
several years, the Federal Reserve (the "Fed") finally made their move. They raised their
key interest rate by 0.25% points. If the economy continues to perform according to Fed
expectations, there will likely be several move modest interest rate hikes in 2016, resulting
in a federal funds rate of close to 1% by year's end. Still,with the all-items inflation rate
projected to register 2% for the year, the Fed's key interest rate will remain negative in
"real" (after-inflation) terms, so a "loose" or "stimulative" credit policy will still be
maintained—the policy will simply be slightly less loose and slightly less stimulative. In
short, the Fed is still encouraging borrowing and spending.
With inflation tame and labor markets not yet at full-employment levels,why did
the Fed make their move to raise interest rates? There are three reasons. First, the Fed
wanted to signal their confidence in the economy by implicitly declaring economic growth
can continue even with slightly higher interest rates. Second, the Fed wanted to begin the
slow climb to a federal funds rate eventually in the 3% range, high enough to allow the Fed
to reduce the rate when the next recession hits. Third, the Fed wanted to moderate the
advantages of investing in asset markets —like stocks and real estate— during a historically
low interest rate environment—in order to avert, or at least reduce—the possibility of
"asset bubbles". Asset bubbles are one of the prime causes leading to recessions.
The national economy performed rather well in 2015. Broad economic growth
(GDP)was above the post-recessionary annual average, although growth was well short of
the longer run (1990-2010) annual average. Employment growth was actually above the
long-run average growth rate. Productivity growth was better than the post-recessionary
average but under the long-run average. The housing market made strong—but not stellar
— gains.
The most notable differences for 2015 were for inflation, the household sector, and
the dollar's international value. The all-item's inflation rate was only 0.5%, due largely to
the dramatic drop in oil and gasoline prices. Households solidified their post-recessionary
gains,with a 5.3% gain in real (after-inflation) median household income, reductions in
relative household debt and debt payments, and a continued strong savings rate. The
dollar's international value jumped 25% compared to its post-recessionary average.
Driven by continued gains in the job market, average earnings and income, and—
importantly, household formation —the national economy should continue expanding in
2016. Real GDP growth will be slightly better at 2.4% - compared to 2.2% in 2015 —jobs
will increase, and the national unemployment (headline) rate will be under 5% by year's
end. The dollar's international value will peak,which will give some steam to exports and
the manufacturing sector. Improved household spending will propel the economy but also
boost debt loads and reduce savings rates.
The biggest change in 2016 will be in the financial sector with the path of short-term
interest rates on the rise. The rise in rates will have several impacts, including moderation
in asset buying, higher interest payments by households, and higher relative interest
2
16
payments on the federal debt. Still,with the Fed's cautious and measured pace, these
changes will not be dramatic.
North Carolina's economy grew faster than the nation's economy in 2015. Real
GDP growth was 3.4% vs. 2.2% for the nation, labor force growth was 3.2% vs. 0.6%,
household employment growth was 3.1% vs. 1.4%, and payroll employment growth was
2.2% vs. 1.9%. The state's unemployment (headline) rate did not drop consistently like the
national rate— despite the state's faster job growth rates— due to the extraordinary rapid
increase in the state's labor force.
As is North Carolina's tradition once an economic expansion takes hold, the state's
economy should again outperform the national economy in 2016. Labor force growth and
job growth should exceed national gains,with approximately 90,000 payroll jobs being
added. The state unemployment (headline) rate will approach 5% at year's end.
Strongest job growth will be in the upper-paying sectors of financial services, information,
and professional/business services and also the lower-paying sectors of leisure/hospitality
and other services.
The state's regional economic divide will also persist in 2016. Charlotte,
Greensboro/High Point, and Durham had the fastest relative payroll job growth in 2015,
while Fayetteville and Hickory actually lost payroll jobs. Rural North Carolina had a
good 2015,with payroll job growth in rural areas slightly exceeding the state growth rate.
In 2016 several regions—Asheville, Burlington, Charlotte, Durham, Raleigh, and
Wilmington—will have year-end unemployment (headline) rates under 5%. But the rates
in Fayetteville and Rocky Mount will end the year near or above 7%.
The Nation: Growth with a Twist in 2015
Gains in the national economy were strong enough in 2015 that the Federal Reserve made
a turn in their monetary policy. Late in the year the Federal Reserve (the "Fed") announced the
first increase in their key interest rate—the federal funds rate— since before the Great Recession.
The Fed cited the strength in the economy and no signs of an impending new recession for their
move. Analysts also think the Fed wants to moderate recent strong gains in asset markets — such
as the stock market—in order to avert an asset bubble. Asset bubbles are often forerunners to a
recession.
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A look at key economic data in Table 1 supports the Fed's assessment of a reasonably
growing economy in 2015. Real(inflation-adjusted) GDP (gross domestic product)was
stronger than the average since the end of the recession(2010-2014) and approaching the twenty
year average from 1990-2010. A similar pattern was seen for real GDP growth per capita(per
person). Especially bullish were strong gains in both real personal income and real personal
consumption per capita, where 2015's numbers were above both the post-recessionary average
(2010-2014) and the twenty year average(1990-2010).
The national labor market also posted new post-recession improvements. The
"headline"unemployment rate—the rate quoted in the media—fell during the year and
approached 5%. Gains in the labor force and in both employment counts (household and
payroll) equaled or exceeded post-recessionary averages. Inflation continued to be a non-issue,
with the core CPI rate (excluding food and energy) coming in at the Fed's preferred 2%rate,
while the all-item rate was still much below the Fed's target. The all-item rate was clearly
impacted by the sharp drop in oil and gasoline prices. Also, interest rates were at near historical
lows in 2015, reflecting both the low inflationary environment as well as the Fed's continuing
accommodative posture.
Key business sector indicators were also upbeat. Although relative business investment
was below the recent(1990-2010)historical average, there was a gain from the post-recessionary
period(2010-2014). The same trend was seen for labor productivity. The housing market
continued to rebound. While the stock market's gains were considerably pared in 2015, this
result was not surprising considering the market has almost tripled since the bottom of the
recession. An international "vote of confidence"was registered for the U.S. economy with the
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Table 1. Performance and Forecasts of the U.S. Economy.
1990-2010 2010-2014 20151 2016
annual average annual average
GENERAL
Real GDP growth rate 2.5% 2.0% 2.2% 2.5%
Real GDP per capita growth rate 1.5% 1.2% 1.4% 1.5%
Real personal income per capita growth rate 1.7% 1.0% 3.1% 1.6%
Real consumption per capita growth rate 1.8% 1.3% 2.4% 2.0%
Headline unemployment rate 5.8% 8.0% 5.0%2 4.7%
Labor force growth rate 1.0% 0.4% 0.6% 0.7%
Household employment growth rate 0.8% 1.4% 1.4% 1.3%
Payroll jobs growth rate 0.9% 1.8% 1.9% 1.7%
All-item CPI inflation rate 2.5% 1.7% 0.5% 2.0%
Core CPI inflation rate 2.4% 1.9% 2.0% 2.0%
3-month Treasury-bill rate 3.5% 0.1% 0.2% 1.5%
10-year Treasury-note rate 5.5% 2.5% 2.3% 2.8%
BUSINESS
Equipment investment, % of GDP 6.3% 5.6% 5.7% 6.0%
Labor productivity growth rate 2.5% 0.3% 1.7% 1.8%
Residential housing price growth rate 3.4% 1.5% 5.6% 4.0%
Residential housing starts growth rate 6.3%3 -11.2%4 8.7% 11.0%
Dow-Jones Industrial Average growth rate 7.7% 10.4% 1.1% 3.0%
Trade-weight dollar index 90.6 85.0 106.4 112.0
Net trade balance, % of GDP' -2.9% -3.4% -2.9% -3.1%
HOUSEHOLDS
Number of households growth rate 1.2% 1.2% 1.0% 1.3%
Real median household income growth rate 0.08% 0.07% 5.3% 1.5%
Real hourly earnings growth rate Not available 0.3% 1.9% 1.5%
Average weekly hours Not available 34.4 34.6 34.5
Household debt, % of GDP 75.0% 83.9% 80.0% 81.0%
Hsehold debt payments, % of disposable income 11.8% 10.6% 10.1% 10.2%
Savings rate, % 5.4% 5.8% 5.2% 5.0%
FISCAL POLICY
Federal budget deficit, % of GDP 2.5% 6.1% 2.4% 2.3%
Federal debt, % of GDP 62.8% 97.1% 100.5% 98.5%
Federal interest payments, % of GDP 2.2% 1.4% 1.2% 1.3%
MONETARY POLICY
Federal funds rate, % 3.82%6 0.08%' 0.15% 1.00%
Money supply growth rate 3.1%6 11.2%' 7.5% 5.0%
Excess reserves growth rate 0.4%6 181.8' -0.5% -1.0%
Money velocity growth rate 0.5%6 -3.9%7 -2.0% -.3%
1 year over year based on the latest data; 'November; 31990-2006;4 2006-2014;5`-`indicates a trade deficit; 6 1990-
2007; '2007-2014; Sources: Federal Reserve Bank of St. Louis; U.S. Dept.of Commerce; author's forecasts
5
19
strong gain in the dollar's value. Since a stronger dollar makes U.S. exports more expensive, a
downside of this "vote"was a slight reduction in exports. But with continued domestic oil
production reducing the need for imported foreign oil, the relative trade deficit maintained its
moderate level.
Households continued to improve their economic position in 2015. Due to low inflation,
real median household income grew a strong 5.3%, well above both the twenty year average and
the post-recessionary average. Real hourly earnings increased more than in the years since the
recession, and work hours also edged up. Household debt relative to GDP, which almost reached
100%prior to the Great Recession, moderated close to the 1990-2010 annual average. Low
interest rates also allowed households to post a thirty-year low in their debt service payments as a
percent of disposable income. The personal savings rate, which fell to negative readings prior to
the recession, continued to register above 5%.
With a stronger economy, the fiscal situation of the federal government became less
unbalanced. As a percent of the economy(GDP), the deficit in 2015 was below the 1990-2010
annual average and well under the 2010-2014 average when fiscal policy was used to stimulate
economic growth. The relative size of the total federal debt declined slightly in 2015. And again
— compliments of low interest rates —the carrying cost of the federal debt(federal interest
payments as a percent of GDP) in 2015 was under the post-recessionary average and just over
half of the annual average posted in the two decades from 1990 to 2010.
After almost a decade of first attempting to brake the decline during the Great Recession
and then trying to stimulate the economic recovery, monetary policy operated by the Federal
Reserve turned the corner in 2015. Fed policy was enormously accommodative during and
6
20
immediately after the Great Recession. Table 1 shows the federal funds rate—one of the Fed's
policy tools— averaged 3.8% during 1990-2007 but was virtually zero from 2007 to 2014.
Likewise, the annual growth rate in the money supply—another Fed tool—almost tripled
between the two periods. Two reasons—besides the weak economy—these actions didn't spark
higher inflation (as many feared)were the unprecedented increase in excess reserves held at the
Fed and the dramatic drop in money velocity. The increase in excess reserves was a way for the
Fed to create money as a backstop for the banks, but to keep that money at the Fed so as not to
elevate prices. Also, the decline in money velocity reduced the ability of dollars in circulation
to generate higher inflation.
At the end of 2015 the Fed announced a modest increase(0.25%points) in the federal
funds rate, the first of many expected rate hikes. Growth rates in both the money supply and
excess reserves also moderated in 2015, and the reduction in money velocity was also slower.
All these moves signaled a shift away from economic stimulation toward economic neutrality of
Fed policy.
The National Economy in 2016
The last(far right) column in Table 1 presents forecasts for the national economic
indicators in 2016. In general, the forecasts are upbeat and suggest a national economy growing
at a slightly faster pace than in 2015. Among the General measures, the biggest changes will be
in inflation and interest rates. Oil prices will stop falling— and may even rise modestly—in
2016, which will cause the all-item CPI rate to be closer to 2% - as compared to the 0.5%rate in
2015. Higher measured inflation will reduce some of the real per capita gains in personal
7
21
income and consumption. As a result of the Fed's tightening of interest rates, short-term rates
will certainly move higher. Long-term rates will also move up due to higher expected future
inflation rates and the view the Fed will push interest rates higher over a multi-year period.
The biggest change in the Business environment will be an increase in the rate of housing
starts and a moderation in the rate of housing price increases. The stock market will gain—but
only slightly—and the dollar will continue strengthening. The latter will present challenges for
the manufacturing sector and keep the GDP growth rate from being even higher than 2.4%.
With the Fed's interest rate moves, Households will see higher borrowing costs in 2016.
This will cause the relative size of household debt payments to increase and the savings rate to
fall. But more limited household borrowing will mean only a small increase in the relative size
of household debt. An acceleration in household formation will boost GDP growth.
For Fiscal Policy, faster economic growth producing larger federal tax revenues will keep
lids on the relative sizes of both the budget deficit and national debt. However, higher interest
rates will mean a rise in the relative size of federal interest payments. If the Fed continues
raising interest rates beyond 2016, the impacts on financing the national debt will become a
prominent issue.
The Fed is now on an announced track to be less stimulative in Monetary Policy. The
federal funds rate will jump to 1.00%by the end of 2016. Money supply growth will moderate
and excess reserves will slightly contract. A faster paced economy with higher interest rates
will accelerate money velocity.
8
22
The "R" Word
The current economic expansion, which began in mid-2009, is already longer than all but
three of the eleven post-World War II expansions. Hence, there is understandable concern about
the imminent possibility of a new recession.
Although no economic forecast is absolutely certain, all signs point to no recession in
2016. However, odds suggest a likely recession before the end of the decade. While the next
recession will be not be as severe as the Great Recession of 2007-2009, it will require
retrenchment by households and businesses for at least half a year. The best guarantee of a
moderate recession is modest debt loads by households and businesses going into the downturn.
The North Carolina Economy: Ahead of the Pack—But Not Everywhere and for Everyone
Table 2 shows the recent performance of the North Carolina economy on key indicators.
Compared to both the longer(1997-2010)period as well as the more recent post-recessionary
period(2010-2014),North Carolina performed much better on all measures.1 In particular, both
real GDP and real GDP per capita had growth rates 50%higher than the national rates. Labor
force growth was an astonishing 5 times faster than the national rate, and job growth from both
the household survey and the payroll survey were stronger than the comparable national growth
rates. Rapid labor force growth was likely due to in-migration of new households from other
states as well as a return of"discouraged workers" (unemployed individuals who had stopped
looking for work and therefore are not counted as officially unemployed) to the active
1 1997 is the beginning year of the longer period due to the unavailability of state GDP data prior to that year.
9
23
Table 2. Relative Performance of the North Carolina Economy.
1997-2010 2010-2014 2015 2016
annual average annual average
NC US NC US NC US NC US
Real GDP growth 2.5% 2.1% 1.3% 2.0% 3.4% 2.2% 3.5% 2.4%
rate
Real GDP growth 0.8% 1.1% 0.2% 1.2% 2.7% 1.4% 2.7% 1.5%
rate per capita
Headline 6.0% 5.8% 8.2% 8.0% 5.5% 5.0% 5.1% 4.7%
unemployment
rate
Labor force 1.1% 0.9% 0.06% 0.04% 3.2% 0.6% 3.0% 0.7%
growth rate
Household 0.6% 0.5% 1.4% 1.4% 3.1% 1.4% 2.9% 1.3%
employment
growth rate
Payroll jobs 0.4% 0.4% 1.9% 1.8% 2.2% 1.9% 2.1% 1.7%
growth rate
Sources: U.S. Dept.of Commerce; author's forecasts
labor force. The fact that the labor force grew faster than employment in North Carolina
explains the rise in the state jobless rate during some months in 2015.
Figure 1 shows the performance of the North Carolina economy and the national
economy on the broadest economic indicator- gross domestic product(GDP). The actual
quarterly rates are shown with the solid lines, and the trends in the rates are depicted by the
dotted lines. There is a definite pattern to North Carolina's growth relative to the nation. First,
the two are connected-analysis shows North Carolina's and the U.S's growth rates move
together two-thirds of the time. Said, another way, two-thirds of North Carolina's growth is
linked to national growth. Second,North Carolina's movement through the business cycle is
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24
Figure 1. Quarterly Growth Rates (%) in Real GDP, North Carolina and the U.S, 2006-
2015.
3
2
1
0
N m N m 1 N m m N m N m N CO, N m y N m
Li) lD LD lD N- n n n 00 00 00 00 Dl Ql 61 O O O O �--1 c-I i-1 N N N N CO m m m Lfl
O O O O O O O O • O • O O
-1
-2
-3
NC US Poly.(NC) Poly. (US)
Quarterly values at annual rates. Source: U.S. Dept. of Commerce
more volatile than in the nation. This can be seen with the smoothed growth rate patterns
(dotted lines) in Figure 1. North Carolina had higher growth rates prior to the recession (before
11
25
2008), lower growth rates during the recession and in the immediate aftermath, but higher
growth rates again as the economic recovery lengthened(2014 and 2015). This same pattern
has been observed during previous business cycles. The main explanation for the state's more
volatile growth pattern is its over-reliance on manufacturing. The relative importance of
manufacturing to North Carolina's economy is 70%higher than for the nation. But since
manufacturing follows more of a"boom and bust"pattern during the business cycle—due to
purchases dropping significantly during recessions but then returning strongly due to pent-up
demand in recoveries - states, like North Carolina, with larger manufacturing sectors also follow
more of a"boom and bust" economic pattern.
The state is expected to out-perform the nation again in 2016. The forecasted 2.1%
growth in payroll jobs will boost non-farm job numbers by close to 90,000. The state's
"headline"unemployment rate will drop to near 5%by year's end. Yet job growth will not be
evenly spread among sectors and salaries. Figure 2 shows the annual percentage increase in
employment in major economic sectors for the 2010-2014 and 2015 time periods. The
economic sectors are ranked from those with the highest average salaries at the top of the graph
(financial services is the top paying sector) to those with the lowest average salaries
(leisure/hospitality has the lowest average salaries). In general, during both periods the fastest
growth has been in the top and lowest paying sectors, and the slowest growth has been in the
middle paying sectors. This is a pattern that has been observed at the national level and is one
contributor to widening income inequality among households. The pattern will continue in 2016.
For decades a geographic divide in economic performance has prevailed in North
Carolina. Figure 3 shows annual average payroll job growth for the 2010-14 and 2015 periods
in the state's regions. In 2010-2014 the metro areas of Asheville, Charlotte, Durham, Raleigh,
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26
Figure 2. Annual Percentage Change in Payroll Employment by Sector, NC.
financial sery
information
prf/bus sery
manufacturing
government
construction
edu/hlth care
trd/transp/util
other sery
leisure/hosp
0 1 2 3 4 5 6
percent
•2010-2014 2015
and Wilmington clearly outpaced other regions in growth. In 2015 the leaders were Charlotte,
Durham, Greensboro, Winston-Salem, and—perhaps surprising—rural North Carolina.
However, even with the relatively positive performance of rural regions of the state in 2015,
broad economic forces still point to further urbanization and faster population and job growth in
metropolitan regions of North Carolina in the years ahead.
Regional unemployment rate forecasts are given in Table 3. All regions are expected to
register lower jobless rates at the end of 2016 compared to late 2015. The metro regions of
Asheville, Burlington, Charlotte, Durham, Raleigh, Wilmington, and Winston-Salem will have
13
27
Figure 3. Annual Percentage Change in Payroll Employment in NC Regions
state
asheville
burlington
charlotte
durham
fayettevillem
greensboro-hp
greenville
hickory
raleigh
wilmington
winston-salem
rural
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4
•2010-2014 2015
Source:U.S. Dept. of Commerce
Table 3. Regional Unemployment Rate Forecasts, % (not seasonally-adjusted)
Region Actual October 2015 Forecasted December 2016
Asheville 4.4 4.1
Burlington 5.1 4.9
Charlotte 5.3 4.2
Durham 4.8 4.5
Fayetteville 7.3 6.9
Greensboro-High Point 5.7 5.3
Greenville 5.9 5.4
Hickory 5.5 5.3
Raleigh 4.7 4.3
Rocky Mount 7.7 7.4
Wilmington 5.3 4.8
Winston-Salem 5.2 4.8
Rural 6.2 5.8
Source:U.S. Dept. of Commerce;author's forecasts
14
28
year-end 2016 jobless rates under 5%. This rate has traditionally been considered "full-
employment". Due to military downsizing, Fayetteville will end 2016 with an unemployment
rate near 7%. Issues related to restructuring their economies for the 21' century will keep
Rocky Mount's jobless rate above 7% and rural North Carolina's rate near 6% in 2016.
Watch for Unknowns
A major problem with economic forecasting is the threat of the unknown—unpredictable
events that can erupt and disrupt economic conditions. There are two varieties of these
unknowns—those we know exist but can't predict their behavior, and those we don't even know
exist! In the first category are the obvious examples of severe weather, international hotspots
(North Korea, the Middle East, terrorism), and domestic disruptions like power outages or
medical epidemics. In the second category are—well, that's just it, we don't know!
As 2016 begins there are new concerns about the Middle East and the stability of China's
economy. Of course, these will require watching and monitoring. And at the end of 2016 we
will have the uncertainty, anticipation, and expectations associated with a newly elected
President. It will be an interesting and memorable year.
15
DAVENPORT&COMPANY Attachment 4 ORANGE COUNTY 29
Oft l I I , -112(11 I V
Investment Overview and Strategy
April 26, 2016
Orange County. NC Investment Overview
As of March 31, 2016 Orange County, NC (the "County") held cash and investments of approximately
$151,355,510 of which $127,654,501 represented County operating funds and $23,701,009
represented bond proceeds from prior debt issuances. A summary of the County's current cash and
investment accounts is shown in the table below:
Investment Jan 2016 Feb 2016 Mar 2016 Fund Type Rates
1 North Carolina Carolina Capital Management Trust-Cash Portfolio
2 General Account $125,542,424.56 $108.825,031.25 $ 97.897,356.12 Operating 0.37%
3 2004 Affordable Housing Escrow 465,657.78 465,780.29 465,927.68 Bond Proceeds 0.37%
4 2006 Public Improvement Project Fund 1,168,203.47 1,168,510.82 1.168,880.57 Bond Proceeds 0.37%
5 2012 Project Fund 2,006,144.42 2,006,672.24 2.007,307.20 Bond Proceeds 0.37%
6 2014 IFC Project Fund 3,298,490.76 3,299,358.59 3.300,402.59 Bond Proceeds 0.37%
7 2015 LOBs Project Fund 16,078,520.64 16,082,750.90 12.979,657.85 Bond Proceeds 0.37%
8 Total NCCMT 148,559,441.63 131.848,104.09 117,819,532.01
9
10 SunTrust
11 Sportsplex Fund $ 2,257,611.78 $ 2,344,856.79 $ 2.355,513.09 Operating
12 2013 Escrow Account 3,778,585.24 3,778,705.00 3.778,833.02 Bond Proceeds 0.04%
13 Balance Account 1,899,819.93 1,899,819.93 1.899,819.93 Operating
14 General Account 9,171,317.75 1,245,126.65 8.738,061.55 Operating
15 Money Market 3,299,046.59 11,299,313.65 10.299,566.66 Operating 0.04%
16 Social Service 146,846.87 170,498.14 192,286.41 Operating
17 Total SunTrust 20,553,228.16 20,738,320.16 27.264,080.66
18
19 BB&T
20 Lockbox $ 4,626,076.33 $ 4,622,801.29 $ 4.619,155.20 Operating
21
22 Finistar
23 Finistar $ 1,652,270.15 $ 1,652,531.31 $ 1.652,741.82 Operating 0.15%(net rate)
24
25 Total Operating Funds $148,595,413.96 $132.059,979.01 $127,654,500.78
26 Total Bond Funds 26,795,602.31 26,801,777.84 23.701,008.91
27 Total Cash and Invsetments $175,391,016.27 $158.861,756.85 $151,355,509.69
*These funds represent amounts to meet liquidity requirements.
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Operating Fund Investment Summary
Operating Fund Investment Balances
$160
c
$140
$120
$100
$80
$60
$40
$20
Jan 2016 Feb2016 Mar2016
JNCCMT SunTrust JBB&TLockbox •Finistar
Operating Fund Allocation-As of March 31,2016
BB&T Lockbox Finistar
4% 1%
SunTrust
18%
_NCCMT
77%
Relevant Investment Benchmarks
0.60%
0.50%
0.40% AltAbA
0.30%
0.20%
0.10%
0.00%
ti<0 r<o � � ti� ti� ti� ti� ti� ti� co cc) co
ti
QTY �a� ��� ��\ P‘).°° 5e� � \°, Occ >`&‘ Feo e
-6 Month Treasury NCCMT-Cash -NCCMT-Term
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DAVENPORT&COMPANY ORANGE COUNTY 31
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Operating Funds Investment Strategy-Overview
As the County's financial advisor, Davenport and Company LLC ("Davenport"), in collaboration with
County Staff is in the process of developing and implementing a comprehensive investment strategy
for County operating funds. The investment strategy is structured to comply with both the North
Carolina State Statute 159-30 for public investment activity as well as GFOA best practices for
investing public funds. Stated simply, the primary objectives for sound investing of public funds are
(listed in order of importance):
• Safety/ Preservation of Principal
• Liquidity
• Yield
The comprehensive investment strategy is designed to allow the County to purchase securities with
longer average lives (maturity dates) and thus, in a normal interest rate environment, realize a higher
investment yield without taking on increased credit risk. The basic tenants of the strategy include:
1. Liquidity Position
Working with County staff a liquidity target will be established to ensure that the County has flexibility
to meet daily cash flow requirements and unknown or unforeseen expenditures. The portion of the
County's portfolio designated for the liquidity position will be held in overnight investments with daily
liquidity, such as the County's current bank deposits and North Carolina Capital Management Trust
("NCCMT") accounts.
2. Cash Flow Forecasting and Laddered Investment Portfolio
County staff and Davenport are in the process of developing a customized detailed cash flow
forecast of operating fund revenues and expenditures. The cash flow forecast will indentify time
periods where projected expenditures exceed projected revenues - these periods of time will be
identified and targeted for investment purchases based upon a targeted asset allocation (discussed
herein). This approach will allow the County to create a laddered portfolio of securities, investing
longer on the yield curve without taking undue investment risk given that future expenditure gaps will
be covered by maturing investments. This laddered portfolio approach will work in collaboration with
the liquidity position to ensure the ability to accommodate short-term variances in cash flow.
3. Asset Allocation
Prior to implementation of the program, an agreed upon asset allocation will be established to
provide guidance for the securities purchased for the laddered portfolio. The Asset Allocation will
take into account investment restrictions established by State Statute, County Policies, Outside
Limitations (e.g. Bond Resolutions) and Investment Credit Factors to create a diversified portfolio of
securities which will minimize concentration in / exposure to any one asset class or issuer. The
Asset Allocation will include:
• Liquid Investments (e.g. Bank Accounts, NCCMT Cash and Term Portfolios)
• US Treasury Direct Obligations (e.g. Bonds, Bills, Notes)
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• US Government Agency Obligations (e.g. Federal Home Loan Mortgage Company, Federal
National Mortgage Association, Federal Farm Credit Bank, Federal Home Loan Bank)
• North Carolina Municipal Securities
• Highly Rated Commercial Paper
• Certificates of Deposit and Bankers Acceptances
4. County Control of Investment Process
The County will maintain in-house control of the investment process. County staff will retain
responsibility for selecting and purchasing securities that best meet the County's goals, objectives
and strategies. The securities will be purchased through an arm's length transaction from a group of
established and pre-approved broker dealers. A purchasing process will be developed to foster
competition and participation amongst the County's broker dealers.
5. Professional Guidance and Reporting
Davenport and County staff will meet quarterly to review the current portfolio holdings, investment
statistics/performance (e.g. portfolio balance, yield, weighted average maturity), and cash flow
forecast. The quarterly meetings will also include the review and development of a suggested
"security buy list" for the coming quarters which will identify timing and asset class for future
investments.
Operating Funds Investment Strategy- Implementation Time Frame
Davenport and County staff are in the process of developing the investment strategy with the goal of
implementation at the start of Fiscal Year 2017. The next steps include:
May Timeframe: Davenport and County staff meet to review and develop a preliminary
cash flow forecast and discuss asset allocation/ liquidity position.
June Timeframe: Cash flow forecast finalized and asset allocation / liquidity position
are agreed upon.
July Timeframe: Davenport and County Staff review initial quarterly investment report
and Program Implementation begins.
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33
The U.S. Securities and Exchange Commission (the "SEC') has clarified that a broker. dealer or municipal securities dealer engaging in
municipal advisory activities outside the scope of underwriting a particular issuance of municipal securities should be subject to municipal
advisor registration. Davenport & Company LLC ("Davenport") has registered as a municipal advisor with the SEC. As a registered
municipal advisor Davenport may provide advice to a municipal entity or obligated person.An obligated person is an entity other than a
municipal entity.such as a not for profit corporation.that has commenced an application or negotiation with an entity to issue municipal
securities on its behalf and for which it will provide support. If and when an issuer engages Davenport to provide financial advisory or
consultant services with respect to the issuance of municipal securities. Davenport is obligated to evidence such a financial advisory
relationship with a written agreement.
When acting as a registered municipal advisor Davenport is a fiduciary required by federal law to act in the best interest of a municipal
entity without regard to its own financial or other interests. Davenport is not a fiduciary when it acts as a registered investment advisor.
when advising an obligated person.or when acting as an underwriter.though it is required to deal fairly with such persons.
This material was prepared by public finance.or other non-research personnel of Davenport. This material was not produced by a research
analyst.although it may refer to a Davenport research analyst or research report. Unless otherwise indicated.these views(if any)are the
author's and may differ from those of the Davenport fixed income or research department or others in the firm.Davenport may perform or
seek to perform financial advisory services for the issuers of the securities and instruments mentioned herein.
This material has been prepared for information purposes only and is not a solicitation of any offer to buy or sell any security/instrument or
to participate in any trading strategy. Any such offer would be made only after a prospective participant had completed its own
independent investigation of the securities. instruments or transactions and received all information it required to make its own
investment decision.including.where applicable.a review of any offering circular or memorandum describing such security or instrument.
That information would contain material information not contained herein and to which prospective participants are referred. This material
is based on public information as of the specified date.and may be stale thereafter. We have no obligation to tell you when information
herein may change. We make no representation or warranty with respect to the completeness of this material. Davenport has no
obligation to continue to publish information on the securities/instruments mentioned herein. Recipients are required to comply with any
legal or contractual restrictions on their purchase. holding. sale. exercise of rights or performance of obligations under any
securities/instruments transaction.
The securities/instruments discussed in this material may not be suitable for all investors or issuers. Recipients should seek independent
financial advice prior to making any investment decision based on this material. This material does not provide individually tailored
investment advice or offer tax. regulatory. accounting or legal advice. Prior to entering into any proposed transaction. recipients should
determine. in consultation with their own investment.legal.tax.regulatory and accounting advisors.the economic risks and merits.as well
as the legal.tax. regulatory and accounting characteristics and consequences. of the transaction. You should consider this material as
only a single factor in making an investment decision.
The value of and income from investments and the cost of borrowing may vary because of changes in interest rates.foreign exchange
rates. default rates. prepayment rates.securities/instruments prices.market indexes. operational or financial conditions or companies or
other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past
performance is not necessarily a guide to future performance and estimates of future performance are based on assumptions that may
not be realized. Actual events may differ from those assumed and changes to any assumptions may have a material impact on any
projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates. Certain
assumptions may have been made for modeling purposes or to simplify the presentation and/or calculation of any projections or
estimates. and Davenport does not represent that any such assumptions will reflect actual future events. Accordingly.there can be no
assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from
those estimated herein. This material may not be sold or redistributed without the prior written consent of Davenport.
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