Page 90 - CityofWataugaAdoptedBudgetFY24

BUDGET SUMMARY

capital improvements and equipment with an expected life of greater than 10
years.

• Debt: Establish guidelines for debt financing that will provide capital equipment
and infrastructure improvements while minimizing the impact of principal and
interest payments on current revenues.

➢ Use of Debt Financing: Debt financing, including general obligation bonds,
revenue bonds, certificates of obligation, and lease/purchase agreements shall
be used only when capital assets cannot be financed from current revenues or
when the useful life of the asset or project exceeds the payout schedule of any
debt.
➢ Assumption of Additional Debt: Additional tax supported debt should not be
assumed without conducting an analysis to determine the community’s ability
and desire to support additional debt service payments.
➢ Affordability Targets: An objective analytical approach should be used to
determine whether new general-purpose debt could be assumed beyond what
is retired each year. Generally Accepted Standards of affordability should be
used in the analysis. These include debt per capita, debt as a percent of taxable
value, debt service payments as a percent of current revenues and current
expenditures, and the level of overlapping net debt of all local taxing
jurisdictions. The direct costs and benefits of the proposed expenditures should
be examined. The decision to assume new debt should be based on the costs
and benefits, plus the ability to assume the new debt without detriment to the
City or its citizens.
➢ Debt Structure: Debt payments should be structured to ensure level repayment.
Level payment schedules improve budget planning and financial management.

➢ Debt Limits: Article XI, Section 5, of the State of Texas Constitution does not
provide for a statutory debt limit for cities. However, it does state: “Cities may
levy, assess and collect such taxes as may be authorized by law or by their
charters; but no tax for any purpose shall ever be lawful for any one year,
which shall exceed two and one-half per cent. [sic] of the taxable property of
such city, and no debt shall ever be created by any city, unless at the same
time provision be made to assess and collect annually a sufficient sum to pay
the interest thereon and creating a sinking fund of at least two per cent. [sic]
thereon.” See also the Texas Tax Code Section 302.001(c).

City Charter Article X - Taxation, Section 10.02 - Power to Tax states: “The
City shall have the power to tax property in accordance with the statutory
provision of the Texas Property Tax Code, as now or hereafter amended by
the state legislature.”

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