Page 26 - Southlake FY20 Budget

Transmittal Letter

Fund balance. The City of Southlake Fund Balance Policy, adopted in 1993, states that the “goal shall be
to maintain a fund balance in the General Fund equal to a minimum of 15% of General Fund-budgeted
operating expenditures, with the optimum goal of 25%.”

The proposed budget reflects an undesignated General Fund balance of 25.05% of expenditures, which
represents $10,487,760, and follows the optimum balance defined in the City’s policy.

Excess revenue and unspent appropriation above the 25% level are set aside for critical, high-impact projects
as a transfer to the Strategic Initiative Fund (SIF). Details about the transfer into the SIF and the use of these
dollars can be found later in this letter.

Maintaining a fund balance at the optimum level identified in the City’s policy addresses
the focus area of Performance Management & Service Delivery and the strategic
corporate objective of “Achieve fiscal wellness standards.”

Debt Service Fund

For FY 2020, revenues are estimated at $6,312,941 with $6,217,941 coming from ad valorem taxes and
$95,000 from interest income. Transfers into the fund are budgeted at $174,243 to pay the debt service for
the bonds issued on behalf of special districts. Total expenditures are proposed at $7,768,190 for annual
principal and interest payments, as well as related administrative costs.

The Debt Service Fund is projected to end the 2020 fiscal year with undesignated reserves of $4,626,499.
The fund balance allows us to meet our fund balance policy which states that the City of Southlake “…shall
also maintain Reserve Funds for all statutorily required reserve funds to guarantee debt service.”

The capital projects funded through the City’s bond program address the focus areas
of Infrastructure and Mobility, and the strategic corporate objective of “Invest to
provide and maintain high quality public assets.”

Utility Fund

The Utility Fund, also known as the Water and Sewer Enterprise Fund, is used to account for the acquisition,
operation, and maintenance of Southlake’s municipal water and sewer utility, supported primarily by user
charges to utility customers. The fund accounts for operational costs as well as debt service for utility system
improvement bonds. The intent of this fund is for the direct beneficiaries to pay for all costs of the fund
– including debt service – through fees levied for the services provided. Revenue and expenses related to
garbage service are also accounted for in the Utility Fund.

Please note that although the City of Southlake will not need to raise rates in 2020, we will pass through
increases from sewer and garbage utility service providers.

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