To help pay for a community’s essential services or build facilities for your enjoyment, cities sometimes borrow money.
Just like you might take out a loan to pay for your home, the City of Southlake might accrue debt for capital projects. Issuing bonds allows the City to spread the cost over several years.
However, we never borrow money to pay for daily operations. Over the past several years, the City has opted to pay cash for projects and limited its use of property-tax supported bonds. Some projects are paid for with special funding approved by voters for a specific purpose.
Property taxes are used to pay off City debt for things like roads and sidewalks. The total debt fluctuates depending on projects funded during the year and payments. Since 2010, the City of Southlake has reduced its tax-supported debt by 69%. The remaining property tax debt obligations will be paid off in less than 10 years.
“Many years ago, we made the decision to reduce property tax supported debt,” said CFO Sharen Jackson. “We’ve worked our plan by using cash for projects, refinancing when market conditions were favorable and amortizing the debt over short periods of time. This has allowed us to reduce the tax rate dedicated to debt, even while we are planning for future infrastructure investments.”
Conservatively managing the amount of bonds issued prepares the City to handle projects that might require bonds in the future, like a new library, an open space acquisition program, updating infrastructure or other large capital projects.
Through using debt responsibly and our excellent financial management, the City has a AAA rating from both Fitch and S&P.
More information about how we manage debt and a deep dive into how to review the current status of the City’s outstanding bonds is available on our website.
Learn more about the City of Southlake’s financial plan for FY 2021 by reviewing the proposed budget.
The financial news is good for the City of Southlake. The most recent bond re-financing will save the City more than $3.3 million in debt payments. The refinanced debt is the outstanding 2005 SPDC and GO Refunding Bonds. The Southlake City Council is expected to approve the refinancing at the May 6, 2014 City Council meeting.
“The City was able to save millions of dollars by using our AAA bond rating from Fitch and Standard & Poors,” said Chief Financial Officer Sharen Jackson. “It is to the City’s advantage to use this rating to receive a lower interest rate on the re-financing.”
2014 Bond Sale
The City also received good news about its latest bond sale. Funding for road, water and sewer improvements will be borrowed at a 2.6% interest rate. Robert W. Baird is the provider for the Series 2014 Certificates of Obligation.
The monies will be put to work on many Southlake projects including: the Southlake portion of the FM 1938 widening project, the North Kimball widening project and the White Chapel Boulevard improvements.
More information about the FY 2014 budget, the City’s debt service funds and the CIP Projects can be found at CityofSouthlake.com/FY2014.