Page 20 - CityofSouthlakeFY26AdoptedBudget

you-go funding to control long-term obligations:
• Accelerated payoff schedule. All existing tax-supported debt will be retired within ten years, well ahead
of industry norms.
• Reduced leverage. Since 2010, property-tax-supported debt has fallen by 62%, even as major infrastructure
has been added. Debt as a share of taxable assessed value will be an estimated 0.23% in 2026, reflecting
prudent borrowing and steady property value growth.
• Cash commitment. The FY 2026 budget continues the use of cash to fund capital project needs by
allocating $17,125,000 million across all funds for parks, streets, facilities and utilities projects. Cash
funding reduces interest expense, shortens project delivery timelines, and preserves borrowing capacity
for future high-value projects. Final cash and debt allocations will be set with the Capital Improvements
Program adoption in February 2026.
Budget Overview
Collectively, these measures protect the City’s low debt ratios, fully fund priority infrastructure through a
balanced mix of pay-as-you-go cash and strategic borrowing, and keep the capital program agile enough
to respond to emerging needs.

Managed expenditure growth. Updating the multi-year financial forecast is an integral part of every annual
budget cycle. During the budget process, staff refreshed projections for FY 2026 and, after analyzing key cost
drivers—compensation and benefits, existing contracts, utilities, and asset maintenance—total expenditure
growth demands were estimated at about 5 percent. Additionally, the City has had a longstanding practice
of evaluating our organic budget growth, or our cost of existing goods and services, against the growth of
the Consumer Price Index (CPI) for the Dallas / Fort Worth Area. As a “cost-of-doing-business” benchmark,
the CPI guideline is calculated from the trailing 12-month average and adjusted for local spending patterns.
For FY 2026, this methodology resulted in a 2.5 percent guideline, well below the projected 5 percent
expenditure growth demands. Evaluation of our cost drivers across expenditure categories of personnel,
operations and capital, revealed that projected growth above the benchmark was largely reflective of
the City’s market-leadership pay philosophy (targeting the 85th percentile for public safety and the 70th
percentile for general government) which by design, outpaces the market and cost-of-living factors used in
CPI calculations.

Understanding cost drivers is important but managing their impact requires several operational strategies.
To bridge the gap between the projected cost pressures and CPI guidelines, the City employs a suite of
operational strategies:
• Budget Optimization. Before funding proposals reached the City Manager, each department completed
a structured self-evaluation to verify alignment with strategic objectives, eliminate duplication, and
redirect under-utilized dollars to higher priorities. Proposals then moved through two peer-review
stages: Deputy Directors assessed the quality and rigor of each submission, and Directors judged the
relative urgency and strategic value of competing needs. This collaborative process ensures that only
the most impactful and well-justified investments advance for final consideration.

• Vacancy & Workforce Optimization. Personnel costs are the City’s largest expense, making thoughtful
workforce management essential. Whenever a position becomes vacant, we conduct a rigorous review
to confirm that the role still aligns with current priorities and service demands. When appropriate, duties
are redistributed, roles are redefined, or positions are temporarily held open. This approach enables
responsible resource stewardship—maintaining competitive compensation and high service quality—
while operating within our existing staffing levels.

• Contract Renegotiation & Cooperative Purchasing. All significant service contracts are systematically

20 FY 2026 City of Southlake | Budget Book FY 2026 City of Southlake | Budget Book 21