Page 232 - CityofSouthlakeFY25AdoptedBudget

Strategic Initiative Fund

The Strategic Initiative Fund (SIF) was created in FY 2006 for the purpose of taking General Fund balance
reserves in excess of the City identified optimal fund balance level and using them for one-time expenditures
for high-impact projects such as infrastructure maintenance, community enhancement, technology and
capital acquisition.

The City of Southlake is recognized for its strong financial management as evidenced by the assignment
of ‘AAA’ ratings by both Standard and Poor’s and Fitch Rating Services and a Aaa from Moody’s. Three
‘AAA’ ratings put the City into a small and elite group of municipalities that enjoy the highest possible credit
ratings assigned from all rating agencies.

In the most recent credit report issued, S&P noted:
“The rating reflects our opinion of Southlake’s:
• Very strong economy with ongoing development, bolstered by access to the Dallas-Fort Worth MSA
and extremely high income;
• Very strong management with strong financial-management policies, practices under our Financial
Strategic Initiative Fund
Management Assessment (FMA) methodology, highlighted by its quarterly budget-to-actual reports
and comprehensive long-term financial and capital planning, and strong Institutional Framework score;
• Historically very strong operating performance with fiscal 2024 year-to-date trending positively, coupled
with the maintenance of very strong reserves in excess of its formal fund-balance policy of maintaining
25% of general fund expenditures; and
• Adequate debt with the majority of overall net debt due to overlapping debt, particularly from Carroll
Independent School District, with additional debt issuance expected, coupled with manageable
pension and other postemployment benefit obligations that represent a relatively small amount of total
expenditures.”

The Fitch Rating report notes, “Robust planning and prudent cost management support maintenance of a
strong financial position... Fitch expects Southlake to demonstrate exceptionally strong financial resilience
during an economic downturn, consistent with past performance. The ‘aaa’ resilience assessment is informed
by the city’s revenue raising capabilities, solid expenditure flexibility and ample financial cushion.”

The Moody’s report details why the City’s credit rating was upgraded to Aaa, and states “The upgrade to
the Aaa Issuer Rating reflects...a steady history of robust reserves supported by multiple years of strong
operating performance. The Aaa rating incorporates the city’s modest debt and pension burden that
will remain affordable supported by a stable local economy, and prudent financial practices.” One of the
innovative tools that the City uses to help manage our strong financial performance is the Strategic Initiative
Fund, also referred to as the SIF.

SIF History
The SIF concept was first used with the FY 2006 budget. The concept was simple: the City would strive
to maintain its optimal General Fund undesignated fund balance of 25% of operating expenses, and sweep
any excess funds that had accumulated in the fund balance over time into the SIF to be used for one-time,
high impact projects.

The following sections describe Southlake’s budgeting goals, helping to provide context for the development
and use of the SIF.

232 FY 2025 City of Southlake | Budget Book