Debt management is a key financial principle that guides the development of Southlake’s budget every year. This approach supports a financial strategy that will allow the City to retire 94% of the current tax-supported debt in 10 years.
“The City uses several different methods to reduce debt, including careful budget management, use of voter-approved special revenue funds, aggressive amortization schedules, paying attention to refunding opportunities, and using cash when possible for major projects,” said Southlake’s Chief Financial Officer, Sharen Jackson. “Our approach has allowed for a reduction in the City’s property tax-supported debt by 60% since 2003 in spite of ongoing infrastructure development.”
“Debt as a percent of assessed value (property tax) has decreased from over 3% in 2002 to a projected 0.44% in 2019,” Jackson notes. “For the fifth straight year, there will be no new property tax-supported debt. The City will use cash to pay for general fund capital needs.”
Special Funds Debt
The City has several special funds that are responsible for paying principal and interest on outstanding debt. These include the Southlake Parks Development Corporation (SPDC) for park-related projects, the Crime-Control and Prevention District (CCPD) for safety and security initiatives, and the Community Enhancement and Development Corporation (CEDC) for projects like Champions Club at The Marq Southlake.
“SPDC, CCPD, and CEDC are voter-approved corporations or districts that help support many services that the Council and our residents have told us are important,” said Southlake City Manager Shana Yelverton. “These funds are supported by a percentage of sales tax and any time we take on capital projects supported by these funds or the general fund, the City pays for them either in cash or with Council-approved low-interest bonds that maximize the City’s AAA and AA+ bond ratings.”
The city also has several revenue bonds that pay for City’s water and sewer system improvements. Debt payment on these bonds is supported by Southlake Water Utilities ratepayers.
Paying It Off
At $0.447 cents for every one hundred dollars of valuation, the City of Southlake’s property tax rate supports basic city services such as public safety, street maintenance, library, and community services. It also helps pay off the debt that’s been incurred projects such as new roadway construction. The rate will apply $.0357 for general operations and $0.09 for the debt service fund.
Total debt service fund expenditures for FY 2019 are projected to be $6,186,261 for annual principal and interest payments, as well as related administrative costs. The projected debt service balance for FY 2019 is $5,826,015.
Special funds are paid off through their own debt funds. Currently, there are no debt obligations for the Crime Control Prevention District. For FY 2019, the SPDC Debt Service Fund will cover total expenditures of $2,886,537, and the CEDC Debt Service Fund will cover total expenditures of $2,451,406.
“The City takes it debt obligation very seriously, said Yelverton. “Several years ago, we worked with the City Council to establish a strategy to reduce the debt as a percentage of assessed valuation over the long term. It’s good to see that percentage decrease year after year.”