Page 300 - Southlake FY24 Budget

Capital Budget Funding Types

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 allocates 5.5 cents of the current tax rate
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 types for these projects:

Cash
The City strives to maximize the use of available cash to finance capital projects and reduce the reliance
on debt financing. Cash funding includes funds transferred from the Strategic Initiative Fund as well as
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.
Capital Improvement Projects
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.

300 FY 2024 City of Southlake | Budget Book