Page 183 - CityofSaginawFY25Budget
P. 183

CITY OF SAGINAW
                                               FUND DESCRIPTION

                                                       2024-2025


                                                  DEBT SERVICE FUND

         The City of Saginaw's Debt Service Fund accounts for the property tax collections and transfers into the fund
         for the payment of principal and interest on general long term liabilities and the actual payments of that
         principal and interest on those general long term liabilities.


         The Debt Service Fund, also known as the Interest and Sinking Fund, is established by ordinances authorizing
         the issuance of bonds and providing for the payment of bond principal and interest as they come due.
         Certificates of Obligation (C.O.) are securities issued by the City for the purpose of paying contractual
         obligations incurred through construction projects or purchasing equipment. Certificates of Obligation do not
         require voter approval. They may be secured by property tax revenue or from other revenue. General
         Obligation (G.O.) debt must be approved by the voters. It may be secured by the ad valorem, or property tax,
         revenue.


         A tax rate is adopted that will produce the money necessary to satisfy annual debt service requirements. The
         2024-2025 property tax rate is .493747 per one hundred dollars of value. The Debt Rate is .218417, or 44%,
         of the total tax rate.


         The Texas Comptroller’s Office issues guidelines (Truth-in-Taxation) for calculating a city’s tax rate. A taxing
         entity must adopt its rate in two separate components - one rate for maintenance and operations and one rate
         for debt service. The debt service rate is the tax rate necessary to pay the unit’s debt payments in the coming
         year.


         The Texas Constitution prohibits any Texas political subdivision from incurring “debt” except in certain ways
         provided by statute. Texas law defines “debt” as any obligation that cannot be repaid during the current fiscal
         year. Therefore, a Texas city may only enter into obligations that may be paid from current fiscal year funds or
         are subject to annual appropriation. A Texas city may only pledge future funds to the payment of the following
         types of obligations, as provided by statute: bonds, certificates of obligation, and tax notes. Bank loans that
         extend beyond the current fiscal year and/or that are not subject to appropriation are likely not permitted for
         cities operating under the general laws of Texas.


         Saginaw is a Home Rule city. As a Texas home rule city, the City of Saginaw is not limited by State Law in the
         amount of debt it may issue. The City Charter places a limit of $1.50 on the total ad valorem tax rate which
         may be levied for both operating and debt purposes. With a combined tax rate of $.493747 the City is well
         within this limit. Of the $.493747 tax rate 44% is allocated for debt service. The remaining 56% is allocated
         for maintenance and operations.


         In 2023 Standard and Poor’s rated the City at AA with a stable outlook.

         The City of Saginaw invests the money held in this fund. The interest earned on these investments generates
         additional revenue for this fund.










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