Page 305 - Southlake FY23 Budget

CAPITAL IMPROVEMENTS PROGRAM (CIP)

capItal project FundIng sources
The FY 2023 Capital Budget contains 36 projects submitted by various City Departments. The total cost of all projects
submitted for FY 2023 represents an expenditure of $44,273,000. Although the Strategic Initiative Fund provides
cash for pay-as-you-go capital projects, the City may still borrow to build needed infrastructure. A portion of the
revenue generated by the property tax rate is allocated to support long-term bond projects through the Debt Service
Fund (see the “Debt Services Fund Expenditures” section for more information). This budget proposes that 6.5 cents
of the current tax rate be allocated to support the City’s General Fund debt. Fees and special revenue are used to
support special purpose debt. A Capital Improvements Program details the projects and costs for a five-year period
and identifies future unfunded projects. Debt Service Funds as well as cash provide the needed money to build these
projects.

The following is a summary of the funding sources for these projects:

cash
For FY 2023, the Capital Budget includes cash funding in the amount of $30,973,000. This includes funds transferred
from the Strategic Initiative Fund as well as cash from other funding sources such as the Public Art Fund, Impact
Fee funds, Storm Water Utility Fund, the Hotel Occupancy Tax Fund, the Park Dedication Fee Fund, Community
Enhancement Development Corporation, and the Southlake Parks Development Corporation Fund. For FY 2023, the
Capital Budget will be 70% cash funded, reducing the need to issue bonds.

Bonds
When the City sells bonds, purchasers are, in effect, lending the City money. The money is repaid, with interest, from
taxes or fees over the years. The logic behind issuing bonds for capital projects is that the citizens who benefit from
the capital improvements over a period of time should help the City pay for them. The City can issue bonds in these
forms:

• General Obligation (G.O.) Bonds
Perhaps the most flexible of all capital funding sources, G.O. bonds can be used for the design or construction of any
capital project. These bonds are financed through property taxes. In financing through this method, the taxing power
of the City is pledged to pay interest and principal to retire the debt. Voter approval is required if the City wants to
increase the taxes that it levies and the amount is included in the City’s state-imposed debt limits. To minimize the
need for property tax increases, the City makes every effort to coordinate new bond issues with the retirement of
previous bonds.

• Certificates of Obligation (C.O.) Bonds
Similar to general obligation bonds except the certificates require no voter approval. Combination tax and revenue
certificates of obligation are issued for both governmental and business type activities. General obligation bonds,
governmental revenue bonds, and tax notes pledge the full faith and credit of the City. Combination tax and revenue
certificates of obligation are payable from the net revenues of the water and sewer system and general debt service
tax.

• Revenue Bonds
Revenue bonds are sold for projects that produce revenues, such as water and sewer system projects. Revenue
bonds depend on user charges and other project-related income to cover their costs.

304 FY 2023 City of Southlake | BUDGET BOOK
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