Page 216 - Southlake FY24 Budget

Strategic Initiative Fund

The Strategic Initiative Fund (SIF) was created in FY 2006 for the purpose of taking General Fund
balance reserves in excess of the City identified optimal fund balance level and using them for one-time
expenditures for high-impact projects such as infrastructure maintenance, community enhancement,
technology and capital acquisition.

The City of Southlake is recognized for its strong financial management as evidenced by the assignment
of ‘AAA’ ratings by both Standard and Poor’s and Fitch Rating Services and a Aaa from Moody’s. Three
‘AAA’ ratings put the City into a small and elite group of municipalities that enjoy the highest possible
credit ratings assigned from all rating agencies.

In the most recent credit report issued, S&P noted “Very strong management with strong financial
policies and practices,” stating “When drafting the budget, management uses historical trends and
statistical information to forecast revenue and expenditures, and works closely with department heads
during the budget process to identify departmental needs. Officials monitor the budget monthly and
adjustments are typically made at midyear, although management has the flexibility to make amendments
Strategic Initiative Fund
throughout the fiscal year. The city has a comprehensive formal long-term financial plan and a formal
long-term capital improvement plan (CIP), with identified funding sources. It also has a written, in-
depth, and conservative investment policy, and gives monthly updates regarding holdings and earnings
to the governing body. It also has a formal debt management policy that it has historically adhered to,
identifying targets for refunding parameters and the types of debt that are acceptable for issuance.
Finally, the city has a formal reserve policy that targets reserves of at least 15% of operating expenditures
for emergencies, which it has historically maintained above this target.”

The Fitch Rating report notes, “Robust planning and prudent cost management support maintenance of a
strong financial position... Fitch expects Southlake to demonstrate exceptionally strong financial resilience
during an economic downturn, consistent with past performance. The ‘aaa’ resilience assessment is
informed by the city’s revenue raising capabilities, solid expenditure flexibility and ample financial
cushion.”

The Moody’s report details why the City’s credit rating was upgraded to Aaa, and states “ The upgrade
to the Aaa Issuer Rating reflects...a steady history of robust reserves supported by multiple years of
strong operating performance. 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. One of
the innovative tools that the City uses to help manage our strong financial performance is the Strategic
Initiative Fund, also referred to as the SIF.

SIF History

The SIF concept was first used with the FY 2006 budget. The concept was simple: the City would strive
to maintain its optimal General Fund undesignated fund balance of 25% of operating expenses, and sweep
any excess funds that had accumulated in the fund balance over time into the SIF to be used for one-time,
high impact projects.

The following sections describe Southlake’s budgeting goals, helping to provide context for the
development and use of the SIF.

216 FY 2024 City of Southlake | Budget Book