Page 118 - CityofMansfieldFY24Budget

Affordability of Additional Debt and Legal Debt Limit

In Fiscal Year 2000, the City of Mansfield developed a 10-year Strategic Plan that anticipates the
financial future of the City of Mansfield, Texas. This plan is a comprehensive planning model that
enables Management to assess the financial well-being of the City. It quantifies the impact of growth and
development and speaks plainly about the fiscal condition of the City. This Strategic Plan incorporates
future revenue sources, operating expenses and projected capital improvement projects for all of the
City’s activities: Governmental Funds and Enterprise Funds. This Strategic Plan measures the City’s
ability to authorize and issue additional debt over the next ten years. Each year, the plan is revised to
reflect growth, population estimates and current operating revenues.

 The City shall use an objective, analytical approach to determine whether it can afford to incur
new debt beyond what it retires each year. This process shall compare generally accepted
standards of affordability to the current values for the City.

General Obligation Bonds:

- Debt per capita
- Debt as a percent of taxable value
- Debt service as a percent of current revenues and current expenditures
- Debt tax rate as a percent of the City’s tax rate

Revenue Bonds:

- Pledged revenues shall be a minimum of 110% of annual debt service
- Pledged revenues shall be a minimum of 125% of average annual debt service
- Pledged revenues shall be 130% of maximum annual debt service for financial planning
purposes
- Annual adjustments to the City’s rate structures will be made as necessary to maintain a
130% coverage factor

 The City Charter of the City of Mansfield, Texas and the statutes of the State of Texas do not
prescribe a legal debt limit. However, Article XI, Section 5 of the Texas Constitution, applicable
to cities of more than 5,000 populations, limit the ad valorem tax rate to $2.50 per $100 of
assessed valuation. The City operates under a Home Rule Charter that also imposes a limit of
$2.50 per $100 of assessed valuation. The FY 2023-2024 budgeted property tax rate is $0.659293
per $100 valuation with a tax margin of $1.84071 per $100 valuation based upon the maximum
ad valorem tax rate noted above. Additional revenues up to $169,651,503 per year could be raised
before reaching the maximum allowable tax base.

Calculation of the City of Mansfield Legal Debt Limit

Legal Debt Limit (15% of Assessed Value)
- General Obligation Bonds and Certificates of Obligation
= Legal Debt Margin

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