Page 178 - GFOA Draft 2

CITY OF SAGINAW
FUND DESCRIPTION

DEBT SERVICE FUND

The City of Saginaw's Debt Service Fund accounts for the property tax collections and transfers into the fund for the
payment of principal and interest on general long term liabilities and the actual payments of that principal and interest on
those general long term liabilities.

The Debt Service Fund, also known as the Interest and Sinking Fund, is established by ordinances authorizing the issuance
of bonds and providing for the payment of bond principal and interest as they come due. Certi cates of Obligation (C.O.)
are securities issued by the City for the purpose of paying contractual obligations incurred through construction projects or
purchasing equipment. Certi cates of Obligation do not require voter approval. They may be secured by property tax
revenue or from other revenue. General Obligation (G.O.) debt must be approved by the voters. It may be secured by the ad
valorem, or property tax, revenue.

A tax rate is adopted that will produce the money necessary to satisfy annual debt service requirements. The 2022-2023
property tax rate is .508042 per one hundred dollars of value. The Debt Rate is .234886, or 46%, of the total tax rate.

The Texas Comptroller’s O ce issues guidelines (Truth-in-Taxation) for calculating a city’s tax rate. A taxing entity must
adopt its rate in two separate components - one rate for maintenance and operations and one rate for debt service. The
debt service rate is the tax rate necessary to pay the unit’s debt payments in the coming year.

The Texas Constitution prohibits any Texas political subdivision from incurring “debt” except in certain ways provided by
statute. Texas law de nes “debt” as any obligation that cannot be repaid during the current scal year. Therefore, a Texas
city may only enter into obligations that may be paid from current scal year funds or are subject to annual appropriation.
A Texas city may only pledge future funds to the payment of the following types of obligations, as provided by statute:
bonds, certi cates of obligation, and tax notes. Bank loans that extend beyond the current scal year and/or that are not
subject to appropriation are likely not permitted for cities operating under the general laws of Texas.

Saginaw is a Home Rule city. As a Texas home rule city, the City of Saginaw is not limited by State Law in the amount of
debt it may issue. The City Charter places a limit of $1.50 on the total ad valorem tax rate which may be levied for both
operating and debt purposes. With a combined tax rate of $.508042 the City is well within this limit. Of the $.508042 tax
rate 46% is allocated for debt service. The remaining 54% is allocated for maintenance and operations.

In 2012, Moody’s Investors Service improved the City’s bond rating to Aa3, and Standard and Poor’s rated the City at AA-.
The City’s waterworks and sewer system revenue bond ratings are Aa3 by Moody's and AA by Standard and Poor's.

The City of Saginaw invests the money held in this fund. The interest earned on these investments generates additional
revenue for this fund.
Debt Payments
8,000,000

6,235,005
6,000,000

4,696,385
4,000,000 4,116,033
3,756,720
3,567,705
3,431,183
3,394,183 3,381,610
3,125,471
2,881,779
2,000,000

0
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