Page 224 - Southlake FY23 Budget

STRATEGIC InITIATIvE FUnD

Fund Balance. City policy originally adopted in August 1993 and amended in 2011 sets a fund balance range of
15-25% of operating expenses for the General Fund. Fifteen percent is considered the minimum fund balance to
achieve. The policy defines 25% as the optimal reserve level for the General Fund. Council and staff are committed
to having a structurally balanced budget while maintaining the optimum fund balance of 25%.

Budget Performance. In any given year, the City’s revenue can perform better than expected. This is especially true
when revenue estimates are conservative. Likewise, City departments sometimes do not spend their entire budget
allocation. Adjustments are made throughout the year, but when year-end numbers show excess revenues and
unspent appropriation, this operating surplus “rolls” into the fund balance for the subsequent fiscal year.

Assuming that the fund balance is maintained at its optimal level, this creates options for the use of the excess
reserve funds above the optimum level.

One option is to put these funds to work as one-time revenue to fund needed projects that are non-recurring
expenses. In this way, the City uses the one-time funding for one-time costs, and can avoid borrowing money for
these projects. This is the basic idea of the Strategic Initiative Fund.

Another option the City Council has exercised has been the granting of a homestead exemption. The City
implemented a one-time general homestead exemption in FY 2009 and again in FY 2013 to complement the ongoing
over-65 exemption ($75,000), disabled exemption ($75,000), and the over-65 tax freeze. This reduced the taxes
levied against Southlake taxpayers for tax years 2008 and 2012, years that the City could afford the reduced revenue,
and the City applied the exemption to its revenue projections for the budget year. For FY 2014, a 3% exemption
was adopted on a permanent basis, and for FY 2015, a 10% exemption was adopted. For FY 2016, a 12% exemption
was included, for FY 2017, the exemption was increased to 16%, and in FY 2018, City Council approved increasing
the exemption to 20% which is the maximum allowed by State law. For FY 2019, City Council approved the 20%
homestead exemption and reduced the tax rate by $0.015. For FY 2020, City Council approved the 20% homestead
exemption and reduced the tax rate by $0.037, bringing the adopted tax rate below the no new revenue tax rate. For
FY 2021, City Council approved the 20% homestead exemption and reduce the tax debt rate by $0.005, continuing
to keep the adopted tax rate below the no new revenue tax rate. For FY 2022, City Council continued the 20%
homestead exemption and reduced the tax operating rate by $0.005 and the tax debt rate by $0.01, continuing to
keep the adopted tax rate below the no new revenue tax rate. For FY 2023, we are proposing to continue the 20%
homestead exemption and reduce the
tax operating rate by $0.03, continuing to TECHNOLOGY
keep the proposed tax rate below the no 12.5%
new revenue tax rate.

Capital Improvement Program (CIP). In
2006, the City had identified over $22 CAPITAL ACQUISITION FACILITY PROJECTS
9.3%
million in General Fund capital projects 0.3%
that needed to be addressed, but were
unfunded for the five-year planning FACILITY RESERVES
period. Given that the City’s annual 10.3%
General Fund bond program was $3 CIP TRANSFER URBAN DESIGN/MASTER PLAN
64.5%
million, it was difficult to see how the SUPPORT
0.9%
City would be able address the critical PUBLIC ART
infrastructure projects in a timely 0.1%
manner. The SIF presented a way for the COMMUNITY ENHANCEMENT
City to infuse cash into its CIP. For FY 2.2%
2006, almost $750,000 was transferred
from the SIF to the CIP, allowing the City
to address more projects than initially StrategIc InItIatIve Fund expendItureS by type, Fy 2006 - 2023
thought possible.

BUDGET BOOK | FY 2023 City of Southlake 223
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