Page 217 - Southlake FY24 Budget

Structural Balance. Good budgeting practices require a city to achieve structural balance; that is, to
have enough annual revenue to cover planned expenses for any given year. Balancing a city’s operating
budget by dipping into reserves is considered a poor budgeting practice for a city, in the same way that
borrowing money from a personal retirement account to pay for monthly household expenses would be
considered unwise. Using reserves to balance the annual budget can mean that the revenue base is not
strong enough to support current service levels and could result in an unsustainable budget over time.

The City of Southlake is committed to maintaining a budget with structural balance, not only with its
current year budget, but also for future years. Staff uses multi-year budgeting to determine if revenues
are strong enough to support the services of the City for future years. 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.
Figure 1
Another option the City Council has
exercised has been the granting of
a homestead exemption. The City TECHNOLOGY
12.0%
implemented a one-time general
homestead exemption in FY 2009
and again in FY 2013 to complement CAPITAL ACQUISITION
8.9% FACILITY PROJECTS
the ongoing over-65 exemption 0.3%
($75,000), disabled exemption
($75,000), and the over-65 tax freeze. FACILITY RESERVES
9.9%
This reduced the taxes levied against URBAN DESIGN/MASTER PLAN
Southlake taxpayers for tax years CIP TRANSFER SUPPORT
0.9%
65.8%
2008 and 2012, years that the City PUBLIC ART
0.1%
could afford the reduced revenue, and
COMMUNITY ENHANCEMENT
the City applied the exemption to its 2.2%
revenue projections for the budget
year.

Strategic Initiative Fund Expenditures
by Type, FY 2006 - 2024

FY 2024 City of Southlake | Budget Book 217