Page 247 - FY 2025 Adopted Operating Budget and Business Plan

Capital Improvement Program Return to Table of Contents

Capital Budget vs. Operating Budget
Although the City’s Capital Budget and Operating Budget are adopted in two separate cycles during the fiscal year, they are
nonetheless connected. The City’s bifurcated tax rate is the most prominent example of this. As stated above, the City’s total
FY 2025 tax rate of $0.5998 is divided between an operating levy ($0.4146) and a debt service levy ($0.1852). In addition, both
the capital and operating funds are profoundly impacted by an increase or decrease in housing values. Additionally, it is
imperative to remember that most capital projects will increase the City’s operating budget expenditures as well since the short-
term maintenance and operations of new capital are budgeted in the City’s operating funds.

While the debt service property tax levy does comprise the primary source of funding for the capital budget, the City supplements
these funds with other sources, such as impact fees, aviation fees, interest earnings, gas revenues, and park fees. These other
sources can either directly fund capital projects or help to fund debt service for certificates of obligation. For example, the
Convention and Event Services Fund and the Park Performance Fund are transferred into the Debt Service Fund to service
certificates of obligation debt used for capital projects. For more information, a list of funding sources can be seen in the individual
capital project summaries.

Conversely, capital funds will annually pay operating funds for service charges. These service charges occur when departments
provide services paid for out of operating funds, such as building inspections or surveys, in conjunction with ongoing capital
projects. For Fiscal Year 2025, the City is currently budgeting for approximately $1.9 million in transfers from capital funds for
service charges.

In addition to general obligation bonds and certificates of obligation, the City utilizes commercial paper, a short-term financing
instrument that typically matures within nine months, to assist in short-term cash flow for the immediate funding of capital
projects. After the commercial paper has been utilized, the City will use a portion of its general obligation bond sale to refund
the commercial paper, effectively turning it into longer-term debt.

FY 2025 Adopted Budget and Business Plan 238 City of Arlington, Texas