Page 233 - CityofSouthlakeFY25AdoptedBudget

Structural Balance. Good budgeting practices require a city to achieve structural balance; that is, to have
enough annual revenue to cover planned expenses for any given year. Balancing a city’s operating budget
by dipping into reserves is considered a poor budgeting practice for a city, in the same way that borrowing
money from a personal retirement account to pay for monthly household expenses would be considered
unwise. Using reserves to balance the annual budget can mean that the revenue base is not strong enough
to support current service levels and could result in an unsustainable budget over time.

The City of Southlake is committed to maintaining a budget with structural balance, not only with its current
year budget, but also for future years. Staff uses multi-year budgeting to determine if revenues are strong
enough to support the services of the City for future years. Strategic Initiative Fund

Fund Balance. City policy originally adopted in August 1993 and amended in 2011 sets a fund balance range
of 15-25% of operating expenses for the General Fund. Fifteen percent is considered the minimum fund
balance to achieve. The policy defines 25% as the optimal reserve level for the General Fund. Council and
staff are committed to having a structurally balanced budget while maintaining the optimum fund balance
of 25%.

Budget Performance. In any given year, the City’s revenue can perform better than expected. This is
especially true when revenue estimates are conservative. Likewise, City departments sometimes do not
spend their entire budget allocation. Adjustments are made throughout the year, but when year-end
numbers show excess revenues and unspent appropriation, this operating surplus “rolls” into the fund
balance for the subsequent fiscal year.

Assuming that the fund balance is maintained at its optimal level, this creates options for the use of the
excess reserve funds above the optimum level.

One option is to put these funds to work as one-time revenue to fund needed projects that are non-
recurring expenses. In this way, the City uses the one-time funding for one-time costs, and can avoid
borrowing money for these projects. This is the basic idea of the Strategic Initiative Fund.
Figure 1
Another option the City Council has
exercised has been the granting of
a homestead exemption. The City d ,EK>K'z
ϭϮ͘ϳй
implemented a one-time general
homestead exemption in FY 2009 and
again in FY 2013 to complement the W/d > Yh/^/d/KE
ϴ͘ϰй & />/dz WZK: d^
ongoing over-65 exemption ($75,000), Ϭ͘ϯй
disabled exemption ($75,000), and
the over-65 tax freeze. This reduced & />/dz Z ^ Zs ^
ϭϬ͘ϵй
the taxes levied against Southlake
/W dZ E^& Z
taxpayers for tax years 2008 and ϲϰ͘ϲй hZ E ^/'EͬD ^d Z W> E
^hWWKZd
2012, years that the City could afford Ϭ͘ϵй
Wh >/ Zd
the reduced revenue, and the City Ϭ͘ϭй
applied the exemption to its revenue KDDhE/dz E, E D Ed
Ϯ͘Ϯй
projections for the budget year.

The graphic below tracks the city’s tax
relief efforts since 2009. Strategic Initiative Fund Expenditures
by Type, FY 2006 - 2025

FY 2025 City of Southlake | Budget Book 233