Page 225 - Southlake FY23 Budget

STRATEGIC InITIATIvE FUnD

Since that time, the City has been able to increase its cash funding for the CIP, lessening the debt the City has to take
on to make appropriate investments into needed street, sidewalk, drainage, facility, and other improvements. About
sixty-five percent of the SIF allocations since 2006 have been used as cash funding for CIP projects, which ultimately
means the City avoids borrowing costs for addressing those projects.

The City has also used the SIF to purchase expensive, but necessary equipment, such as fire apparatus and
ambulances, make improvements to City facilities such as the Senior Activity Center, improve the City’s technology
infrastructure, and establish a much needed facility maintenance reserve fund.

The chart on the previous page details SIF projects funded since 2006.

Like many other municipalities, the City was impacted by the recent economic recession and had to make decisions
during those years to freeze pay, leave certain positions unfilled, and defer the purchase of needed equipment in
order to achieve structural balance with its budget. But the impact of the recession was minimized by the SIF. The
SIF has been an important tool for the City of Southlake to use to weather economic events like the recession by
allowing the City to move forward with capital projects without compromising the City’s fund balance, raising taxes,
or increasing the City’s debt load.

The City’s budget is sustainable and healthy, and able to withstand the effects of unforeseeable economic impacts.
This is due, in part, to the City’s use of innovative financial practices, such as the SIF.

ratIng agency aSSeSSment and perSpectIveS
Bond rating agencies review financial information to inform investors of key metrics associated with debt issuances.
Ratings are assigned based on the investment risk. Three rating agencies have reviewed the City’s financials,
including its debt profile and economic prospects, management decision-making, and governance. All three have
assigned their highest credit rating to the City of Southlake’s property-tax-supported debt. Recent reports from the
City’s rating agencies complimented the City’s financial management.

S&P’s rating report notes:
“The rating reflects our view of the city’s:
• Very robust and strong economy, with access to the Dallas-Fort Worth MSA;
• Very strong management, with strong financial policies and practices under our Financial Management
Assessment (FMA) methodology and a strong institutional framework score;
• Historical trend of operating surpluses in the general fund and maintenance of reserves over 65% during
the past three fiscals; and
• Manageable debt profile, despite the potential for additional debt plans”

Fitch reported:
“Fitch expects the city’s pace of spending to remain generally in line with revenue growth. Fitch
does not anticipate pressure on service levels given anticipated modest population growth.

The city of Southlake exercises full control over work force spending providing a sound level of
expenditure flexibility. Fiscal 2018 carrying costs were moderately elevated at about 20% and
reflect a front-loaded principal payment schedule.

Robust planning and prudent cost management support maintenance of a strong financial position,
evidenced by high reserves in excess of policy targets.”

Moody’s reported:
“The Aaa rating incorporates the city’s modest debt and pension burden that will remain affordable supported by
a stable local economy, and prudent financial practices.”

224 FY 2023 City of Southlake | BUDGET BOOK
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