Page 83 - Hurst FY20 Approved Budget

Financial Policy Guidelines continued

Sales Tax

Sales tax revenue projections shall be conservative due to the volatile nature of this economically sensitive
revenue source. The 2019-2020 sales tax projections, including the sales tax reserve, have been adjusted to
account for recent downward trends and other indicators related to sales tax. While still healthy, the sales tax
reserve has been reduced allowing for an increase in budgeted sales tax; however, we anticipate actual collections
to decrease by approximately -2.27%. During 2018-2019, the City saw monthly sales tax increases ranging from
1.1% to 5.1%. Fiscal year 2019-2020 marks the eighteenth year of a 20-year sales tax sharing agreement with the
developer of North East Mall. Under this agreement, the developer receives a rebate for a portion of sales taxes
earned above the rates prior to the expansion of North East Mall and the construction of Shops at North East Mall.
The developer’s rebate is capped in both time and total dollars. The shops portion of the agreement reached
maximum value during the 2008-2009 year allowing the City to begin collecting 100% of associated sales tax
earnings in 2009-2010. A reduction in the Mall rebate sharing percentage from 80% to 75% in 2010-2011 will
generate an estimated $300,000 and $100,000 of one-time revenue for the General and Half-Cent Sales Tax
Funds in subsequent years respectively.

Utility Rates

The City will adopt annual utility rates that will generate revenues adequate to cover operating expenses and meet
the legal requirements of bond covenants. Depreciation is also budgeted to plan for adequate capital replacement
in water distribution and sewage collection systems. The water and sewer rates for 2019-2020 budget year will
increase by 2%. This increase is due to cover increases in wholesale water and wastewater costs. Additional
financial policies in the Enterprise Fund section of this document.

Investment Policies

The City’s investment policy is more restrictive than the State’s Public Funds Investment Act. The stated goals of
the investment policy, in order of importance, are safety of principal, liquidity, yield, and public trust. Investments
made by the City will be in conformance to policies contained in the City of Hurst Investment Policy, adopted
August 27, 2019. Interest earnings are distributed to accounting funds according to ownership of the invested
dollars. This revenue is budgeted for each fund in the annual budget. Each month, the Finance and Investment
Committee meets to review investment activity and monitor the investment policies and procedures of the City.

Other Revenue Policies

The City continually strives to obtain additional major revenue sources as a means to balance the budget. In
January 1993, voters adopted an additional 1/2 percent sales tax for Community Services purposes. In September
of 1995, voters overwhelmingly approved an additional 1/2 percent sales tax for crime control and prevention
purposes and voted to extend the tax for an additional twenty years in May 2010. In fiscal year 2008-2009, Council
approved a new Storm Water Management fee that will provide for drainage improvements throughout the City
while providing expenditure relief to the General and Debt Service Funds. User fees and charges are reviewed
annually to ensure they are comparable to the cost of providing services.

Debt Management Policies

The City’s debt management policy is conservative. It is summarized below. This policy can also be found in the
Other Funds Section of this document.

1. The City will diligently monitor its compliance with bond covenants.

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