Page 216 - CityofArlingtonFY26AdoptedBudget

Capital Improvement Program

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 2026 tax rate of $0.6298 is divided between an operating levy ($0.4446) and a debt service levy ($0.1852). Additionally,
both capital and operating funds are significantly impacted by changes in housing values. Additionally, it is essential to note that
most capital projects will also increase the City’s operating budget expenditures, as the short-term maintenance and operations
of new capital are typically budgeted within the City’s operating funds.

While the debt service property tax levy constitutes the primary source of funding for the capital budget, the City supplements
these funds with additional sources, including 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 2026, 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. This short-term financing
instrument typically matures within nine months to facilitate short-term cash flow and 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 2026 Proposed Budget and Business Plan 210 City of Arlington, Texas