Understanding City Debt
The City of Southlake is committed to managing its finances responsibly and transparently.
This page contains a variety of information on the City’s use of borrowed money for the construction of capital projects, how this debt is repaid and the guidelines that are used to properly manage the use of debt. The site also contains debt trend graphics, and financial assessments prepared by bond rating agencies.
We hope you find the materials informative.
Why Does the City Borrow Money?
The City of Southlake borrows money to pay for the construction of roads, water lines, sewer lines, parks, recreation facilities, City buildings and other capital infrastructure.
Much like families who borrow money for big ticket items like their home – but not to pay their electric bill -- the City limits its borrowing for the purchase of assets with a useful life of twenty or more years. The City never borrows money to pay for day-to-day operations.
Issuing bonds for important City projects allows the City to move forward to meet service needs like expanded roadways, but spreads the cost several years and allows for future taxpayers (who enjoy the benefit of the facility) to help pay for the asset.
How Are Projects Selected for the City’s Bond Program?
The City of Southlake has numerous master plans detailing community needs through build-out. These plans, collectively referred to as Southlake 2030, include recommendations for capital projects to ensure that the City prepares adequately for the future.
Each year, City staff members review the 2030 recommendations and develop a five year Capital Improvement Program (CIP) detailing costs, funding sources and planned timelines for large projects. City Council reviews the CIP and approves funding for the coming year’s projects as part of the annual budget process.
How Does the City Pay Back the Borrowed Money?
The City has several revenue streams that support the development of facilities and infrastructure. These funding sources are used to retire debt, as described below.
• Property taxes are used for roadway and sidewalk projects, and also were used to pay Southlake’s portion of Town Hall. Since 2003, property tax supported debt has been reduced by 60% because the City has opted to pay cash or borrow for short periods of time for these kinds of projects. In fact, no property-tax supported debt has been issued during the past five fiscal years.
Long-term property tax-supported debt as a percentage of the City’s assessed value has dropped from 3.01% in FY 2003 to 0.44% in FY 2019, as this chart illustrates:
- Utility system rates are used as a source of income for building water and sewer lines, storage tanks and other capital Items. A portion of the funds derived from utility bills is dedicated to building the utility infrastructure needed for the system, large projects that often require bonds to complete.
- Crime Control and Prevention District was approved by the voters to build public safety facilities, among other things. Funds are generated from the sales tax paid by people shopping in Southlake. It is conservatively estimated that only 25% of the sales tax collected comes from Southlake residents.
- Since the District’s initial approval by the voters, the City has built the West DPS Fire/Police Station, DPS Headquarters, and the DPS North Training Facility.
- Southlake Parks Development Corporation Sales Tax District, approved by voters, was put into place to fund the purchase, development and maintenance of parks and open space in the City. The sales tax collected is used to pay principal and interest on bonds issued to build the park facilities that have been identified in the City’s park master plan.
- Over $75,011,760 million has been invested in Southlake parks since the District was formed, with 75% of the sales tax collected coming from non-resident shoppers.
- Community Enhancement and Development Corporation Sales Tax District was approved by voters (among other things) to fund the construction of The Marq Southlake, a premier recreation, senior center and banquet hall.
- The Tax Increment Reinvestment Zone was created to develop Town Square and other taxing jurisdictions helped pay for the Square’s public improvements in the zone. Five other entities have helped pay the debt on Town Hall, parks, streets, water lines, sewer lines, sidewalks and drainage improvements. Property taxes were “captured” from property owners in the specific geographic area of the zone and then used to pay off debt incurred for the previously mentioned projects. The zone encompasses Town Square and a few other locations.
How can I be sure the City is using debt responsibly?
Bond rating agencies review financial information to inform investors of key metrics associated with debt issuances. Ratings are assigned based on the investment risk. Two rating agencies have reviewed the City’s financials, including its debt profile and economic prospects, management decision-making and governance. Both have assigned their highest credit rating to the City of Southlake’s property-tax supported debt.
Having an Aaa rating from Moody's (rating document) and AAA ratings from Fitch (rating document) and S&P (rating document) is a testament to the City’s excellent financial management.
How can I review specifics about City debt?
House Bill 1378, passed during the 2015 legislative session, requires every city to annually report various figures related to the city’s amount of debt. Click here to read the current status of the City's outstanding bonds, and here for a report that gives context to the numbers. The documents contain information such as:
- The amount of all authorized debt obligations;
- The principal of all outstanding debt obligations;
- The principal of each outstanding debt obligation;
- The combined principal and interest required to pay all outstanding debt obligations on time and in full;
- The combined principal and interest required to pay each outstanding debt obligation on time and in full;
- The amounts required by Nos. 1-5 limited to authorized and outstanding debt obligations secured by property taxes, expressed as a total amount and per capita amount;
- The following for each debt obligation: (a) the issued and un-issued amount; (b) the spent and unspent amount; (c) the maturity date; and (d) the stated purpose for which the debt obligation was authorized;
- The current credit rating given by any nationally recognized credit rating organization to debt obligations of the political subdivision; and
- Any other information that the political subdivision considers relevant or necessary to explain the values.
The City of Southlake borrows money to build large, capital assets that have a useful life of at least 20 years. Over the past several years, the City has limited its use of property-tax supported bonds, opting instead to pay cash for these projects. Other projects are built with special funding, approved by the voters for that purpose, or with fees paid by ratepayers for the service. The City manages its debt responsibly as evidenced by two AAA bond ratings.