Intergovernmental - State-Shared Revenues A tax of 6 percent is levied by the State on the gross receipts of electric power and light, gas, telephone and telegraph utility companies, except that gas companies pay 4 percent on the first $25,000 of receipts. The City receives from the State one-half of the tax on gross receipts of such companies from sales inside the City.

A State tax at the rate of 9¢ per gallon is levied on gasoline and other motor fuels. An appropriation of one cent per gallon is made and distributed to municipalities for local street maintenance and betterments, and is allocated on the basis of local street mileage and population. Municipalities also receive a refund of 8¢ per gallon utilized by them.

The State levies an excise tax on beer and wine sales. Beer is taxed at the rate of $15 per barrel. Wine is taxed on a per gallon rate as follows: fortified wine - 70¢; unfortified wine - 60¢; and North Carolina wine - 5¢. Counties and municipalities where beer and wine are sold share in the excise taxes on beer and unfortified wine, based on population therein, as follows: twenty-three and threefourths percent on beer excise tax revenue and fifty percent on the excise tax on unfortified wine. Excise taxes received by the City are shared in by the City's General Fund and Municipal Debt Service Fund, and the Park and Recreation Commission General Fund based on their respective tax levies.

Intergovernmental - State Grants - The City receives matching grants from the State Law Enforcement Assistance Administration (“L.E.A.A.”) which have been utilized principally for the acquisition of police equipment. The funding of such grants is 90 percent Federal, 5 percent State, and 5 percent City.

Intergovernmental

Federal Grants

The City received Federal categorical grants prior to and during the three fiscal years ended June 30, 1975 for a municipal information systems project, which terminated as of June 30, 1975, and during the three years ended June 30, 1975 for certain job training and development and emergency employment programs, which were consolidated into the manpower block grant program and were accounted for in a separate special revenue Manpower Fund for the fiscal year ended June 30, 1975.

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Intergovernmental Alcoholic Beverage Control Board Revenues Liquor may be sold only in county or municipal Alcoholic Beverage Control (“ABC”) stores. Profits from operation of the stores are retained by the County or municipality. The City receives 47.5 percent of the distributed profits from such operation within the County. Such profits are shared by the City's General Fund and Municipal Debt Service Fund, and the Park and Recreation Commission General Fund based on their respective property tax levies.

Intergovernmental — County Reimbursements The City maintains and pays debt service costs for a joint City-County law enforcement center. The City also funds the operating budget of the joint City-County Planning Commission, the Community Relations Committee, and a purchasing operation. The County reimburses the City for the County's share of the costs of the center, the Commission, the Committee, and the purchasing operation, and such reimbursements are accounted for as revenues.

Licenses, Permits, and Fees — The City levies a license tax for business privilege licenses which is collected by the County Tax Collector as agent for the City. License taxes vary according to the type of business. Charges are also imposed for motor vehicle licenses, dog licenses, and other miscellaneous licenses.

Intragovernmental Services

Computer and garage services rendered and charged by certain General Fund departments to other non-General Fund departments are reported as intragovernmental revenues for financial reporting purposes.

Charges for Current Services - Building inspection fees and Park and Recreation Commission facility fees for use of its Memorial Stadium, Park Center, and Revolution Golf Course are the principal sources of charges for current services. Building inspection fees vary for different types of building construction, electrical, or plumbing inspections. Such fees are deposited in the City's General Fund. Park and Recreation Commission facility fees are deposited in the Park and Recreation Commission General Fund.

The following table shows the consolidated tax and non-tax revenues and transfers for the five fiscal years ended June 30, 1975:

Note: The increase in tax revenues for 1972 reflects increased assessed property values due to revaluation. The increase in tax revenues for 1975 reflects the expansion of the property tax base by annexation of approximately 32.5 square miles with a population of approximately 45,000 on January 25, 1974. Assessed property values for 1975 aggregated approximately $3.6 billion (assessment ratio equaled 100 percent) as compared with $1.7 billion in 1974 (assessment ratio equaled 60 percent).

Municipal Debt Service Fund

The Municipal Debt Service Fund is established to provide and account for the payment of interest on and principal of all general obligation debt, other than that issued for and serviced by revenue producing governmental enterprises and that payable exclusively from special assessments. A separate property tax levy is made for debt service purposes. All interest earned in the City's General Fund and in all non-enterprise bond and capital projects funds, exclusive of interest earned in certain federal categorical grant capital projects funds which is restricted for expenditure only in such funds, is transferred to the Municipal Debt Service Fund. This fund also shares in profits from operation of the ABC stores, intangible personal property tax, and beer and wine excise taxes based on the respective tax levies for the City's General Fund and Municipal Debt Service Fund, and the Park and Recreation Commission General Fund.

The following table shows the tax and non-tax revenues and transfers for the Municipal Debt Service Fund for the five fiscal years ended June 30, 1975:

Note: See note following the table under "General and Special Revenue Funds" herein for comments respecting increases in tax revenues for 1972 and 1975. In 1973, the increase in tax revenues reflects an increase in the tax rate for debt service purposes from 19¢ to 25¢ (assessment ratio equaled 60 percent), an increase of 31.6 percent. In addition, transfers from other funds of interest earned were $2,268,813 for 1975 as compared to $956,143 for 1974.

In fiscal 1976, the tax rate for debt service purposes was reduced from 15 to 11g, a decrease of 26.6 percent from the 1975 rate (assessment ratio equaled 100 percent).

Revenue Sharing Fund

The Revenue Sharing Fund is used to account for the City's Federal Revenue Sharing entitlements and subsequent transfers of such entitlements to other funds, principally for expenditure on capital

projects. The Fiscal Assistance to State and Local Government Act, approved by the 92nd Congress on October 20, 1972, will terminate as of December 31, 1976 unless Congressional action is taken prior to such date to extend such assistance.

Water and Sewer Funds

The Water and Sewer Funds account for water and sewer services supplied to customers under a rate structure designed to produce revenues sufficient to provide for operating expenses, including depreciation, and interest on water and sewer debt.

The 1974 annexation (see "The City General Description”) while enhancing property tax revenues, caused an initial negative impact on utility revenues. Water and sewer rates were reduced by one-half for approximately 6,500 accounts in the annexed area resulting in an annual loss of revenues of approximately $750,000; however, the accompanying expansion of services initially generated additional growth in related services, and should generate long-term growth in all services, resulting in additional revenues.

Revenues were also negatively affected by a decline in average daily water usage of 1.2 million gallons or 3.2 percent from 37.5 million gallons in 1974 to 36.3 million gallons in 1975 after a significant increase in 1974. This decrease is attributed to the unusual 97.5 percent increase in rainfall between May and September, 1975, normally the peak period for water and sewer billing, as compared with the preceding year. Water usage during the first quarter of 1976 reflected a return to the long-term upward trend as the daily average usage during the period was 39.9 million gallons.

The effect of annexation and the decrease in water consumption on revenues was offset by an increase in sewer service fees attributable principally to additional revenues generated from privately owned sewer systems acquired during 1975 as a result of annexation discussed above, and in increased rates for water and sewer services averaging 17.7 percent, effective May 1, 1975. The rate increases are estimated at current usage to generate additional revenues in 1976 of approximately $1.9 million and were necessitated principally by the effect of inflationary pressures on operating expenses and rapid capital facilities expansion.

The following table shows the consolidated operating and non-operating revenues of the Water and Sewer Funds for the five fiscal years ended June 30, 1975:

Note: Water and sewer rate increases were placed in effect in June, 1972 which were designed to increase operating revenues by 23.4 percent.

Airport Funds

The Airport Funds account for the operation of the City's Douglas Municipal Airport. Revenues, principally charges for use of facilities, continue to be adequate to provide for operating expenses, including depreciation, and interest on airport bonds.

During 1975, the effects of the national economic recession were also felt in the aviation industry, as reflected by a slight decline in enplaned passengers from 1,170,022 for 1974 to 1,148,006 for

1975, a reduction of 22,016. Gross landing weight, which is the basis for airline use charges, increased during this period resulting in additional landing area revenues for 1975, as compared to 1974, of $222,279, an increase of 47.2 percent. Eastern added new scheduled flights in the Spring of 1975 resulting in an additional 10,000 available passenger seats boarding from Charlotte.

The following table shows the consolidated operating and non-operating revenues of the Airport Funds for the five fiscal years ended June 30, 1975:

At January 31, 1976 total unearned City grant authorizations amounted to approximately $30,517,000 for the following programs:

Such authorizations will be earned as expenditures are made by the City for such programs.

These programs are principally for capital facilities, except for the manpower program and approximately 20 percent of the community development program. Objectives of the manpower program include the provision of comprehensive manpower services to enable individuals to secure and retain employment, public service employment, manpower training for unemployed and underemployed persons, and part-time employment and on-the-job training for certain students from low income families. Objectives of the community development program include the development of urban communities to provide for improved housing and living environment, and the expansion of economic opportunities, principally for persons of low and moderate income. Although such objectives of the latter program involve substantial capital expenditures for physical development, approximately 20 percent of expenditures are for related social support programs for services to adults and families, children and youth, and aging citizens.

EXPENDITURES

Expenditures for the years ended June 30, 1975, 1974, and 1973 for the General and Special Revenue Funds (see "Revenue Structure General and Special Revenue Funds" herein), Municipal Debt Service Fund, Revenue Sharing Fund, Water and Sewer Funds, and Airport Funds are presented in Appendix A.

LOCAL GOVERNMENT BUDGET AND FISCAL CONTROL ACT

The Local Government Budget and Fiscal Control Act, as amended by the 1975 General Assembly primarily to facilitate adherence by local governments to the accounting principles contained in the American Institute of Certified Public Accountants' Industry Audit Guide, Audits of State and Local Governmental Units, sets forth the procedure by which the City's budget is adopted and administered. Such Act requires the adoption of a balanced budget, including all appropriations required for debt service as estimated by the finance officer. Also required is the elimination of any deficit in a fund resulting from adverse deviations in estimated and actual revenues. Any deficit is required to be eliminated by the imposition of a property tax levy at rates which will produce the revenue necessary to balance appropriations and revenues. The annual budget must be adopted by the Council by July 1 of the fiscal year to which it applies, except that a capital project budget which authorizes all appropriations necessary for the completion of a capital project and which need not be readopted in any subsequent fiscal year may be adopted in lieu of annual appropriations for such project.