Page 423 - CityofSouthlakeFY27Budget

TABLE OF CONTENTS

City of Southlake

Financial Guiding Principles

CITY OF SOUTHLAKE
Financial Management Guiding Principles Appendix
The following principles govern the City of Southlake’s approach to financial management and budget development. Developed over two decades of disciplined stewardship, these principles have
contributed to ‘AAA’ credit ratings from Standard & Poor’s, Fitch, and Moody’s, placing Southlake in a small and elite group of municipalities that hold the highest possible rating from all three agencies.
Together, they establish the standards by which Council and staff ensure responsible, sustainable financial management for current and future residents.

PRINCIPLE POLICY STATEMENT WHAT IT MEANS IN PRACTICE
The City will align all budget and resource allocation decisions The FY 2027 budget is built directly from the City's Strategy Map,
with the City Council’s strategic priorities and the goals of the which cascades from the four focus areas into specific strategic
Strategic Strategic Management System. Budget requests will be evaluated corporate objectives. Every budget request is evaluated against
Alignment against the City’s adopted focus areas, ensuring that funding these objectives through a structured, cross-departmental review
decisions reflect community priorities rather than departmental process, ensuring resources are directed toward the outcomes
inertia. Council has identified as most important to the community.
The City will adopt an annual budget in which total expenditures
Structural do not exceed total revenues and recurring expenditures are The FY 2027 budget matches recurring expenditures with reliable
revenue streams, producing strong net revenues that reinforce
Balance supported only by recurring revenue sources. Reserves and one- long-term stability and preserve capacity for strategic investment.
time revenues will not be used to fund ongoing operating costs.
The City will maintain an undesignated General Fund reserve at
Optimum the optimum level of 25% of operating expenses, with a minimum For FY 2027, 25.78% of General Fund operating expenses are
floor of 15%. This reserve will be preserved as a financial cushion held in reserve, exceeding the 25% optimum target. All other
Fund Balance
against unexpected events, revenue shortfalls, or emergencies operating funds also maintain reserves in accordance with policy.
and as a safeguard of the City’s top-tier credit ratings.
Across FY 2025, FY 2026 and FY 2027, the City reduced staffing
The City will benchmark annual budget growth against the
Managed Consumer Price Index for the Dallas/Fort Worth area. When through vacancy reassessment, departmental reorganizations,
and position repurposing, with no impact to service levels. These
Expenditure projected costs exceed that benchmark, staff will employ budget reductions, combined with contract renegotiations, process
Growth optimization, process improvement, and resource realignment to efficiencies, and budget optimization, have supported limited
close the gap before requesting additional revenue.
General Fund expenditure growth, most recently 2% for FY 2027.
The City will issue debt only for high-value, long-life assets where
borrowing is more cost-effective than deferral and where
Strategic Since 2010, property-tax-supported debt has fallen by 53%. All
Debt intergenerational equity supports spreading costs to future existing tax-supported debt remains on track for retirement within
Management beneficiaries. The City will maintain rapid amortization schedules ten years.
with the goal of retiring 100% of property-tax-supported debt
within ten years.
The City will maximize pay-as-you-go cash funding for capital
Cash projects across all eligible fund sources, including the Strategic For FY 2026, 63% of planned capital expenditures were cash
Funding of Initiative Fund, the Utility Fund, sales tax corporations, impact funded, totaling $23.2M across all sources. Total cash transfers
Capital fees, and other dedicated funds. Cash funding will be the for the FY 2027 CIP total $21.05M across multiple funding
Projects preferred method for capital investment, with debt deployed only sources.
when strategically appropriate.
FY 2027 marks the City's sixteenth consecutive tax relief initiative.
The City will pursue the lowest responsible tax rate each year Over the last three fiscal years, the tax rate has been reduced by
while sustaining service quality and meeting other financial 2.9 cents, from $0.319 to $0.290, with the FY 2025 and FY 2027
Tax Relief commitments. Tax rate management and tax relief will be treated rates below the no-new-revenue rate. At $0.290, the current rate
as ongoing priorities, with the recognition that tax relief and cash-
funded capital investment are competing policy choices drawn is the lowest in nearly forty years. The maximum 20% homestead
exemption is maintained alongside $75,000 over-65 and disabled
from the same General Fund surplus pool.
exemptions and the over-65 tax freeze.
The City will maintain a compensation philosophy that targets pay FY 2027 funds a 3% cost-of-living adjustment for all eligible
at or above the 70th percentile of the designated labor market for employees, maintaining the market positions established in the
general government positions and the 85th percentile for sworn
Employer of public safety personnel. The City will benchmark total benefit cost city’s compensation philosophy. Benefits cost holds at 30.6% of
Choice payroll, consistent with the City's 30% benchmark. These
at approximately 30% of payroll, providing a consistent measure investments were accomplished within the City's managed
of competitiveness across organizations with varying benefits
structures. expenditure growth framework.
The City will develop and maintain a five-year financial roadmap, The multi-year operating plan is built on conservative revenue
updated each budget cycle, using conservative revenue growth assumptions and accounts for inflationary cost pressures,
Multi-Year assumptions and accounting for known cost pressures. Every planned infrastructure investments, and compensation philosophy
Sustainability capital project will be evaluated for its impact on future operating commitments. Capital project operating impacts are estimated
budgets, debt service, and financial capacity so that the full cost of during project scoping and integrated into long-range financial
ownership is understood before commitments are made. projections.
The City will preserve the award-winning, accredited standards of The FY 2027 budget maintains all existing service levels, including
service that define Southlake, even during periods of slower
Maintain revenue growth. Budgets will be developed with the assumption CALEA and CFAI accreditation standards, ISO Class 1 fire rating,
Service that no existing service levels will be reduced, and operational and GFOA Triple Crown financial reporting recognition. Staffing
Levels reductions and reorganizations are designed to improve efficiency
efficiencies will be pursued to protect quality within available
resources. without reducing services.

FY 2027 City of Southlake | Budget Book 423