Page 304 - CityofWataugaAdoptedBudgetFY25

DEBT SERVICE

The Debt Service Fund, also known as General Obligation Interest and Sinking Fund, was
established to provide for the payment of bond principal and interest and for the payment of fiscal
agent fees as they come due. Property tax rates and tax levy are required to be computed and
levied to provide the money required to pay principal and interest as it comes due. Revenues are
collected in the General Obligation Interest and Sinking Fund for the payment of general long-term
debt, principal, and interest. The General Obligation debt is financed by property taxes and
interest earned on investments. The FY2024-2025 tax rate was adopted at $0.5702 per $100
valuation, of which $0.209149, or 36% funds the FY2024-2025 debt service payments. The Utility
Debt Service fund is funded through a transfer from the Water and Sewer Operating fund from
revenues received from residential and commercial utility customers.

Debt issuance finances the City’s purchase of land, buildings, land improvements, parks, and the
construction and reconstruction of streets and drainage facilities. In addition to infrastructure,
debt issuance finances large dollar capital outlay items such as fire trucks and public works heavy
equipment.

The fund is accounted for on the modified accrual basis of accounting. Revenues are recorded
when available and measurable, and expenditures are recorded when the liability is incurred.

Debt Management

The Watauga Charter provides that any limitation on the tax rate shall be determined in
accordance with the statutory provisions of the Texas Property Tax Code, as now or hereafter
amended by the state legislature, but does not set a limitation on the debt component.

Outstanding Debt Service by Issuance

During FY2006-2007, the City issued $3,400,000 of Combination Tax and Limited Pledge
Revenue Certificate of Obligation bonds, which are paid from property tax levies. This issuance
funded the renovation of the City’s public safety facilities, including police, fire, and emergency
medical services, and various street improvements.

In FY2013-2014, the City issued $3,500,000 of Combination Tax and Limited Pledge Revenue
Certificate of Obligation bonds, which will be paid from property tax levies. This debt opportunity
was available without any increase in the tax rate since the City’s total debt obligations decreased
the end of FY2013-2014. The expansion of the existing Community Center to provide for an
updated Senior Center facility and improvements to Bursey Road, a major thoroughfare in the City
were funded by this issuance. Both projects were completed by FY2016-2017.

In FY2015-2016, the City issued $5,885,000 Combination Tax and Limited Pledge Revenue
Certificates of Obligation bonds, which will be paid from property tax levies. These funds were
used for street improvements throughout the City and quality of life projects such as a splash pad,
trails, and parking improvements. Whitley Road phase I was completed in FY2021-2022.

In FY2016-2017, $1.2 million of the Utility Fund debt service dropped off due to the final payment
being made in FY2015-2016 for the debt service associated with the purchase of the Water
system from North Richland Hills. In the summer of 2017, the City Council considered and
approved additional utility project infrastructure funding by issuing certificates of obligation in the
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