Page 238 - Saginaw FY19 Annual Budget

CITY OF SAGINAW
DEBT MANAGEMENT POLICY
2018-2019

LEGAL DEBT MARGIN

Article XI, Section 5 of the State of Texas Constitution states in part:
“… no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one-
half percent of the taxable property of such city, and no debt shall ever be created by any city,
unless at the same time provision be made to assess or collect annually a sufficient sum to pay
the interest thereon and creating a sinking fund of at least two percent thereon.”

As stated in the Texas Constitution, the amount of bonds a home rule city may issue is limited by
its charter. As a home rule city, the City of Saginaw, Texas is not limited on the amount of debt it
may issue because the charter does not specify a limitation. However, there are restrictions on
the City’s power to tax as stated below.

Section 13.05, City of Saginaw Charter - Limitation of Tax Rate
The maximum tax rate shall not exceed one dollar and fifty cents ($1.50) on the One Hundred
Dollars ($100.00) valuation of taxable property within the City of Saginaw.

Even though the Texas Constitution allows a higher tax rate the City of Saginaw is bound by its
charter. The City’s Charter provides that general property taxes are limited to $1.50 per $100 of
assessed valuation for general governmental services including the payment of principal and
interest on general obligation bonds. The 2018 adopted tax rate is $.4718 per $100 of assessed
valuation based on 100% of appraised value. This is well under the $1.50 limit.

Rules promulgated by the Office of the Attorney General of Texas stipulate that such Office will
not approve tax bonds of any city unless the city can demonstrate its ability to pay debt service
requirements on all outstanding tax debt, including the issue to be approved, from a tax levy of
$1.00 per $100 of valuation. The maximum tax rate for debt service of $1.00 on the 2018 taxable
assessed valuation of $1,843,457,430 would generate tax revenue of $18,434,574. After paying
the current year’s debt service payment of $3,392,610 the city would have an available debt
service capacity of $15,041,964.

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