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ADOPTED | BUDGET

Overview of Debt Service Funds

Property tax rates and levy are required to be computed and collected, which will provide sufficient
funds to pay principal and interest as it comes due. Debt issuance finances the City’s purchase of
land, buildings, land improvements, and construction and reconstruction of streets and drainage
facilities. Current projects are listed in the Capital Improvement Section of this budget document.
Utility Debt Service is the principal and interest payments for the City’s Utility System. The
revenue source for these payments is from current revenues of the Utility Fund and interest
earnings from bond proceeds. The Park & Recreation Facilities Development Debt Service Fund
makes principal and interest payments for debt issued to upgrade the park and recreational
facilities of the City. These funds are secured by a one-half percent sales tax approved by voters
in 1992. Aquatic Park Debt Service Fund makes principal and interest payments for debt issued
for attractions at the aquatic park. Other Debt Service Funds included in this section are Golf
Course Fund Debt Service, Tax Increment Finance Districts #1 and #2 Debt Service, Drainage
Utility Fund Debt Service, Building Services Fund Debt Service, Equipment Services Debt
Service. A summary schedule for citywide debt service is included in the following pages.

General Debt Service

General Debt Service is used for the accumulation of resources for payment of general long-term
debt principal and interest. Resources include an applicable portion of the ad valorem tax levy
and related interest income useable form debt service. Funding of the Debt Service Fund is made
on a conservative basis of estimating the collectable portion of the tax levy. From this collectable
portion, an allocation of available funds is made between General Fund operating revenue and the
debt Service Fund. Requirements for debt service are based on the amount of outstanding
general obligation debt and related debt service costs. The debt service requirements are
predictable; because once a bond sale is closed the requirements can only be altered by a bond
sale for new money or a refunding of old issues. Bonds are primarily sold to fund Capital
Improvement Program projects and to refund existing debt.

Utility – The Utility Fund makes payments for the principal and interest of scheduled debt service
associated with Utility System improvements and refunding bonds. Debt service payments are
made semi-annually. The debt service is paid from current revenues of the Utility System.

Park Fund Debt Service – The Park and Recreation Facilities Development Debt Service Fund is
used to make principal and interest payments on debt issued for the Park and Recreation Facilities
Development Fund. These debt issues are solely dedicated for park and recreational purposes
including the construction of a tennis center, family Aquatic Park, design and construction of hike
and bike trails, and general improvements to neighborhood parks.

Golf – The Golf Course Fund makes payments for the principal and interest of scheduled debt
service associated with Golf Course improvements and refunding bonds. The source of revenue
for Golf Course debt service is current revenues of the Golf Course.

379 NRH | TEXAS