Page 253 - Watauga FY21 Budget

DEBT SERVICE

General Fund Debt - The Debt Service Fund, also known as General Obligation
Interest and Sinking Fund, was established to provide for the payment of bond principal
and interest and for the payment of fiscal agent fees as they come due. Property tax
rates and tax levy are required to be computed and levied to provide the money
required to pay principal and interest as it comes due. Revenues are collected in the
General Obligation Interest and Sinking Fund for the payment of general long-term
debt, principal, and interest. The General Obligation debt is financed by property taxes
and interest earned on investments. Of the proposed $0.580404 tax rate, an amount
of $0.179708 funds the property tax share of the 2020-2021 debt payment. This is
30.9% of the overall tax rate. Debt issuance finances the City’s purchase of land,
buildings, land improvements, parks, and the construction and reconstruction of streets
and drainage facilities. In addition to infrastructure, debt issuance finances large dollar
capital outlay items such as fire trucks and public works heavy equipment.

The fund is accounted for on the modified accrual basis of accounting. Revenues are
recorded when available and measurable, and expenditures are recorded when the
liability is incurred.

Debt Management

The Watauga Charter provides that any limitation on the tax rate shall be determined in
accordance with the statutory provisions of the Texas Property Tax Code, as now or
hereafter amended by the state legislature, but does not set a limitation on the debt
component. In 1998, $2,000,000 was issued to pay for a drainage management lake
to control flooding in the southern portion of the city. It was determined that for the first
few years of debt payments, funding for this 1998 debt would come from the Bunker
Hill Drainage Impact Fee Fund and, in a limited amount, from the Watauga Parks
Development Corporation Sales Tax operating fund.

A preliminary Capital Improvements Plan identified approximately $11,800,000 in
unfunded street construction and reconstruction. The preferred position of “pay-as-
you-go” was reconsidered due to the number of streets identified and the dollar amount
of the projections. As a result of being able to maintain a constant tax rate in FY 1999-
2000 and the ability to lower future tax rates, the City issued debt in the amount of
$4,060,000 in December 1999. Lower interest rates did make it possible for the City to
refinance the majority of this debt ($2,855,000) in FY2005-06.

The lowering of interest rates and market conditions in 2001 did make conditions
possible for the City to refinance Series 1992 General Obligation bonds.

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