January 18, 2016 RE: Funding Our Future 2030 Working Draft To whom it may concern, On December 15, 2015, a working draft Funding Our Future 2030 was presented to the Audit and Finance Committee of the Irving City Council. As the long‐term financial planning process moves forward, the Audit and Finance Committee will continue to discuss and receive information on the results and its recommendations of the plan in meetings throughout the first half of 2016. The plan as presented here is a working draft and may be subject to some changes during that time. City of Irving | 825 W. Irving Blvd. | Irving, TX 75060 | (972) 721-2600 | www.cityofirving.org
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Funding Our Future 2030
Introduction
City of Irving Profile
The City of Irving is a diverse municipality that benefits from a large corporate tax base, dynamic urban and suburban
environment, and high quality of life. Irving is among a handful of cities in Texas to have AAA/Aaa bond ratings from both
Standard & Poor’s and Moody’s Investor Service for its general obligation (GO) debt. Bond rating agencies are quick to
acknolwedge the city’s strong financial policies, healthy general fund reserves, stable corporate tax base, strategic
management, and strong fiscal leadership. The city’s history of financial strength and stability allows residents and
businesses to enjoy some of the lowest property tax rates, fees, and water rates in North Texas. In support of our financial
goals, city administrators have remained dedicated to efficiency, effectiveness, and innovation in service delivery.
Irving is also a corporate powerhouse with more than 25 million completed square feet of office space, including Las
Colinas, a master-planned development which has one of the largest office parks in North Texas. The city is home to
corporate and regional headquarters for iconic organizations such as ExxonMobil, Kimberly-Clark, Fluor, Flowserve,
Celanese, NEC, CEC Entertainment, Inc., Boy Scouts of America, and many more. In a stable economy, this large population
of businesses in Irving provides stable property tax revenue and significant economic sustainability.
Irving’s central location between Dallas and Fort Worth, adjacency to the Dallas-Fort Worth International Airport, access
to Dallas Area Rapid Transit (DART) rail and bus service, and connection to several critical regional highways make the city
a desirable place for residents, visitors, and businesses. Irving is well connected to the region, the nation, and the world.
In addition to reasonable tax rates and fees, residents enjoy a high quality of life, 81 beautiful parks, the 22-mile Campion
Trail along the Trinity River, aquatic facilities, athletic fields, six recreation centers, four libraries, and the top-rated Irving
Arts Center. The city is a safe place to live, do business, and visit—crime has declined to record lows over the past 10 years.
About the Plan
To ensure the long-term sustainability of the city’s financial health, staff has developed Funding Our Future 2030 – a longterm financial planning model.
All levels of government are facing significant challenges to provide quality services and infrastructure that meets the
expectations of citizens at a reasonable cost. In order to be effective over the long-term, government entities must
confront these challenges head-on. The purpose behind Funding Our Future 2030 is to understand the city’s long-term
financial outlook in order to promote financial sustainability.
To accomplish this, Funding Our Future 2030 consolidates financial and operational data that is currently contained in a
variety of sources into a single report that communicates the city’s current financial state and overall financial direction.
The report consists of 4 major sections:
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Demographic and Economic Outlook;
Revenue Analysis;
Expenditure Analysis;
Reserve Analysis;
Capital Analysis;
Debt Analysis;
Findings, Conclusions, and Recommendations; and
Future Considerations and Planning.
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Funding Our Future 2030 is intended for a variety of audiences, but the primary audience is City Council. It is written to be
a data-driven tool to assist City Council in making informed and strategic policy decisions to address the city’s key
challenges. It is also a communication tool for senior leadership to document for residents the financial conditions that
impact budgetary decisions.
The plan was developed by a cross-functional team of city staff with participation and involvement from nearly every
organizational department. The team compiled historical and current data from a variety of resources, including the
annual budget, the Comprehensive Annual Financial Report (CAFR), the Dallas Central Appraisal District (DCAD), US Census
Bureau, and the US Bureau of Labor Statistics (BLS). Wherever possible, subject matter experts within the organization
confirmed the validity of data trends and projections from third-party sources.
Planning Model
Funding Our Future 2030 is one of several tools the city uses to deliberately and strategically build the future of Irving as
directed by the community and City Council. These plans include the Comprehensive Plan, Strategic Plan, Financial Plan,
and Business Plan and Budget. Each is directly connected to the others, and together they form the vision of the future
and the steps that will be taken to achieve that vision.
Figure 1: Irving Planning Model
Drives
Informs
Moderates
Comprehensive Plan
Strategic Plan
Funding Our Future 2030
Business Plan & Budget
The Comprehensive Plan is a 20 to 30 year community-based shared vision that focuses on future land use, housing needs,
transportation infrastructure, open space, parks, recreation facilities, development, and redevelopment. It identifies the
type of community Irving strives to become and the investments needed to foster that environment. The Comprehensive
plan sets the long-term vision, and informs the Strategic Plan.
The Strategic Plan is a three to five year organizational plan that identifies strategic goals and areas of focus to achieve
the shared vision of the Comprehensive Plan. City Council identifies the citywide Goals and Objectives that will be the
focus for the organization for the next few years in order to advance the city towards the vision.
Funding Our Future 2030, then, drives the goals and objectives of the Strategic Plan into the annual Business Plan and
Budget and moderates the city’s goals based upon resource limitations. It provides a “reality check” about what can be
funded and when to promote financial sustainability. It is a long range financial outlook focusing on the next 10 to 15 years
that helps City Council balance wants, needs, and limited resources. Prior to Funding our Future 2030, this balancing was
not consistent.
The last component is the annual Business Plan and Budget, which has a short-range, one-year focus. This report provides
detailed operational and capital planning information about what the city will undertake and/or accomplish during the
fiscal year and allocates the resources necessary to perform these actions. The Business Plan and Budget are the tangible
actions the city will take this year to promote the accomplishment of the Strategic Plan and Comprehensive Plan. It enables
the strategic management of city throughout the fiscal year.
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Key Planning Challenges
There are a variety of challenges facing Irving and municipalities throughout the nation. Funding Our Future 2030 provides
a lens through which to see the city’s key challenges and the potential impact of City Council’s policy direction to address
those challenges. Some of the key challenges that have been identified by staff and City Council include:
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Managing the city’s outstanding debt;
Adequately funding vehicle and equipment replacement;
Adapting to the rising costs of healthcare;
Offering competitive total compensation;
Meeting our infrastructure maintenance and replacement needs;
Long-term funding for sustainable economic development;
Maintaining the city’s credit worthiness; and
Continuance of appropriate tax rates and municipal charges to meet service level expectations of residents,
visitors and businesses.
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Demographic and Economic Outlook
To inform the assumptions that create the foundation of Funding Our Future 2030, the planning team has evaluated the
city’s current and projected demographic profile and economy. While the long term financial plan focuses on FY 2015
through FY 2030, the demographic profile looks beyond through 2040. This is because the city anticipates reaching its
stable population and the substantial buildout of developable land in the city by 2040. Therefore, staff has evaluated how
the city’s demographics may change until growth stabilizes. It should be noted that economic analysts often project
economic performance two to five years into the future. Beyond those two to five years, projections are based upon
historical economic trends.
Demographic Profile
The City of Irving’s estimated 2013 population was 228,653, according to the US Census Bureau’s Population Estimate
Program (The 2013 population estimate is the most recent data provided by the PEP). From the 2000 census to the 2010
census, the city’s population increased by nearly 25,000 residents, or 13 percent. Over the last five years, annual
population estimates have increased by an average of approximately two percent per year. The city’s population, currently
estimated at 236,818, is expected to continue to grow with current trends sustaining over the short term.
The North Central Texas Council of Governments (NCTCOG) projects that the city’s population will increase to 280,112 by
2035 and 290,120 by 2040 (Figure 2). This translates to an increase of more than 53,000 people over the next 25 years or
a 22 percent growth in population. After 2040, the city’s population is expected to remain mostly stable. The addition of
more than 53,000 residents over the next 25 years will have a significant impact on the city’s budget, both adding revenue
and increasing service demands.
Figure 2: City of Irving Population
300,000
280,112
290,120
269,289
275,000
258,465
247,642
250,000
236,818
228,653
225,000
216,290
200,381
200,000
191,615
175,000
2000
2005
2010
2015
2020
Actual
2025
2030
2035
2040
Projection
Source: U.S. Census Bureau Population Estimate Program
From 2000 to 2013, the age characteristics of the city’s population have remained mostly consistent. Irving has
experienced a small increase in the population over 65 (one percentage point). The most significant changes in Irving’s
age are a two percentage point decrease in population aged 20 to 24 and a four percentage point decrease in population
aged 25 to 34. Based upon past data, the city may not experience as much of an increase in population over 65 as other
regions.
The educational attainment of Irving’s population has increased over the last nine years. Data from the US Census Bureau’s
American Community Survey (ACS) shows a five percentage point increase in the percent of residents with a high school
diploma or higher and a nine percentage point increase in the percent of residents with a bachelor’s degree or higher.
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Increases in educational attainment are associated with lower poverty rates and higher household income. Based upon
current trends and anticipated future development, the educational attainment of the city’s population may continue to
increase over the short-term and be sustained over the long-term. The decrease in the population of 25 to 34 year olds
may impact growth in educational attainment.
Despite increases in educational attainment, some measures for poverty reported by the ACS have increased in the city.
From 2000 to 2006, the percentage of families living in poverty increased by nearly 5 percentage points. The rate has
remained mostly stable since 2006, with the exception of brief spikes during the most recent recession. Compared to the
Dallas-Fort Worth Metroplex, Irving has a slightly higher poverty rate by nearly one percentage point. The most significant
change in poverty status in Irving is growth in the percentage of families with children under 18 living in poverty. The
percentage of families with children under 18 living in poverty has increased from less than 12 percent in 2000 to more
than 19 percent in 2013. The future poverty rate in Irving will depend on multiple factors, including education,
development, redevelopment, and employment growth. To address this rise in poverty, the city will continue to build
relationships with local educational organizations to promote a strong education ethos within the city. Job growth and
job opportunities will also remain a focus of Irving’s economic development initiatives and activities. Additionally, through
its update of the comprehensive plan and with the aid of federal grants, the city will have the foundation to set and achieve
affordable housing objectives that achieve a real impact on the reduction of poverty.
The median household income for the city was $51,722 in 2013 (Figure 3); this is lower when compared to the median
household income of the Metroplex ($57,398). The city’s median household income has increased each year from 2006
to 2013. During the 2007 to 2009 recession, median household income growth slowed to less than 1 percent per year.
After the recession, the growth rate has been near 1.5 percent with the exception of 2012 when the city experienced a
growth rate near 8 percent. The median household income is important because it is one factor considered by bond rating
agencies when rating the city. The future median household income for the city will depend on a variety of factors,
including inflation rates, business recruitment efforts, development, and redevelopment.
Figure 3: Median Household Income
$60,000
$57,398
$54,730
$55,546
$54,539
$55,000
$49,740
$51,722
$50,000
$47,266
$45,000 $46,543
$45,879
$45,337
$40,000
2005
2006
2007
Irving
2008
2009
2010
2011
2012
2013
Dallas-Fort Worth-Arlington
Source: U.S. Census Bureau American Community Survey (1-Year Estimates)
The city has higher rates of housing unit rental than housing unit ownership, according to data from the ACS. In 2013, 36
percent of housing units (including single-family homes, condos, townhomes, apartments and other dwellings) were
occupied by owners, while 64 percent were occupied by renters. By contrast, 60 percent of housing units in the Metroplex
were owner occupied and 40 percent were renter occupied. One factor in Irving’s higher rental rate is the large number
of multifamily units in the city. More than 54 percent of housing units were in structures with 3 or more units in 2013. The
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rental rates and housing composition in Irving is not expected to change significantly, though residential economic
development efforts may impact these rates.
Land Use
Irving has approximately 41,752 acres of developable land within its corporate boundaries (land not within the 100-year
floodplain), and a total land area of 68 square miles. This land is composed of a wide variety of uses. For this report, land
uses will be consolidated into housing, business, mixed-use, public use, and vacant.
As of 2014, less than 9 percent of developable land in Irving was vacant, and over 91 percent has been developed (Figure
4). There are approximately 3,653 acres of vacant land in the city. Nearly 25 percent of land has been developed for
housing—including single-family homes, multi-family homes, and manufactured homes. Based upon Irving’s 2013
estimated population and the average household size in Texas, there are nearly 88,000 housing units in the city.
Additionally, 20 percent of land is dedicated to business uses—including office, retail, commercial, industrial, and utilities
(Figure 4). Commercial land use excludes DFW Airport property. The most recent data available from the 2012 US Census
Bureau’s Business Patterns statistics estimates the number of businesses in the city at 6,091. According to the US Bureau
of Labor Statistics (BLS), these businesses employed approximately 114,440 employees.
The remaining 46 percent of land in the city is for public-use—including parks, open space, right of way, government
facilities, schools, streets, sidewalks, highways, churches, post offices, and the DFW Airport (Figure 4). While much of this
land is permanently public-use, some of it can fluctuate. The development of property owned by DFW Airport within the
city (15 percent of developable land) is difficult to project. Some land is already developed, some has yet to be developed,
and some may never be developed. The city has limited influence and control over the buildout of airport property.
Figure 4: Land Use
2014
2040
5%
9%
15%
25%
29%
15%
20%
30%
32%
21%
Housing
Business
DFW Airport
Undeveloped
Public Use
Housing
Business
DFW Airport
Mixed Use
Public Use
Sources: Dallas Central Appraisal District; City of Irving Planning and Community Development Department
Staff estimates that the city will reach buildout (substantial development of all vacant land) by 2040. Once buildout is
reached, the city will no longer receive increases in property tax revenue due to new taxable value. Increases in property
tax revenue will only occur as valuations increase or properties are redeveloped. The city’s population will also stabilize.
Using the city’s 2008 Generalized Future Land Use Plan, the largest projected increase in land use will be mixed-use (Figure
4). Staff anticipates that nearly 2,000 acres of land will be developed for mixed-uses. Mixed-use development includes
multiple land uses in one area, comprising housing, retail space, and commercial office space. Mixed-use developments
are anticipated to be a part of the Las Colinas Urban Center and former Texas Stadium area.
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The next largest increase in land use is projected to be housing, adding nearly 1,500 acres of development. This
development will include apartments, condominiums, townhomes, and single-family detached homes. Using NCTCOG’s
2040 population projection for Irving and the current average household size in Texas, an additional 23,000 housing units
will be constructed over the next 25 years for a total of about 111,000 housing units in the city.
Lastly, business use is projected to add approximately 500 acres of development to total 21 percent of the city’s land. The
growth in business land use will be accompanied by growth in the number of businesses and employment in the city. It
will have a significant impact on the city’s daytime population and demand for services.
The remaining 45 percent of land in the city will consist of public use, including 15 percent of DFW Airport property. It is
unclear how the airport will utilize this land.
These figures are estimates based upon the city’s 2008 Generalized Future Land Use Plan. The city is currently developing
a comprehensive plan, which may result in changes to these estimates. Additionally, there are a variety of unknown factors
that could shape future land use, including the development of airport property.
Combining the population and land use projections, the city is expected to add more than 53,000 residents and develop
more than 3,600 acres of vacant land through 2040.
Economic Outlook
Overall Economic Expectations
The U.S. economy is expected to continue to grow over the next few years, though likely at a slower pace. The
Congressional Budget Office (CBO) projects the US Gross Domestic Product (GDP) to grow by 2.9 percent annually in 2015
and 2016 (Figure 5). Growth is expected to slow to 2.5 percent in 2017. After 2017, the CBO projects an annual average
GDP growth rate of 2.1 percent. Projections for 2018 through 2025 are based upon national GDP average growth,
population projections, and demographic shifts.
The Wells Fargo Securities Economics Group, who publishes leading economic reports of both the national and Texas
economies, estimates similar growth over the next two years, but cautions that the nation is entering its sixth year of postrecession expansion. The average length of prior post-recession expansions is five years. The growth cycle in the nation
may slow in the next several years and it is unknown for how long the US economy may experience its next recessionary
period. These long-term projections do not reflect any forecasts for a future recession.
Figure 5: U.S. GDP Annual Rate of Change
5.0% 4.1%
3.8%
4.0%
2.5%
3.0%
1.8%
2.0%
2.4%
2.3%
1.8%
2.9% 2.5%
2.1%
2.2%
1.6%
1.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-2.8%
-4.0%
2000
2002
2004
2006
2008
2010
Actual
2012
Projection
Source: U.S. Bureau of Economic Analysis
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2014
2016
2018
2020
One reason for the projected slowing rate of growth is an expected rise in interest rates by the Federal Reserve (Fed). The
CBO projects that the Fed will increase the Federal Funds Rate from 0.1 percent at the end of 2014 to 0.6 percent by the
end of 2015. As of October 2015, the Federal Funds Rate remained low at 0.13 percent. The rate is projected to continue
to rise to 3.7 percent by the end of 2019. Increasing the Federal Funds Rate reduces the extent to which monetary policy
supports economic growth.
In addition to the Federal Funds Rate, the Treasury is expected to increase interest rates on three-month and 10-year
Treasury notes. The 3-month rate is estimated to remain near zero through mid-2015, rise to 2.6 percent in 2017, and
settle near 3.4 percent in 2019. The 10-year rate is estimated to rise from 2.4 percent in 2014 to 3.9 percent in 2017 and,
then, 4.6 percent by the end of 2019. In August 2015, the 3-month interest rate remained low at 0.08 percent, and the
10-month rate remained low at 2.28 percent. As the Federal Funds Rate and the Treasury bond rates increase, market
interest rates will rise and GDP growth rates are likely to slow and stabilize. Increases to interest rates will also impact the
city’s debt costs.
The U.S. economy is expected to continue to grow in the next few years, but is not projected to reach the high levels seen
in other post-recession periods.
The Texas economy is expected to continue growing at a moderate pace, although recent data suggests that the economy
may begin to slow. Since the end of the most recent recession, Texas has been among the fastest growing major states in
the nation. Much of this growth has been driven by the oil and gas industry, although there has been significant growth in
many other industries. The Texas Comptroller of Public Accounts estimates that the real Gross State Product (GSP)
increased by 3.7 percent in 2014 and projects that it will increase by 3.0 percent in 2015, 3.2 percent in 2016, and 4.1
percent in 2017. Both Wells Fargo Securities and the Dallas Branch of the Federal Reserve (Dallas Fed) anticipate continued
economic growth above the national average, but at a slowing pace.
The recent drop in oil prices that has been sustained for longer than expected may slow growth further. Wells Fargo
Securities warns that layoffs from the oil and gas industry may affect consumer spending and confidence. They also warn
that the decline in oil and gas prices will likely affect additional industries that provide goods, professional services, or
technical support to oil and gas firms. Wells Fargo anticipates that the state’s economy has enough momentum to sustain
growth through the recent slide in oil prices. Through June of 2015, Texas has sustained job growth over the national
average, despite decreases in oil and gas employment. The Metroplex in particular may be less impacted than other
regions around the state by low oil prices, as the economy has diversified over the last few decades with significant job
growth in industries unrelated to oil and gas.
The Texas Leading Index (Index), published by the Dallas Fed, indicates some economic uncertainty in the state (Figure
6). The Index is a composite of 8 leading indicators of economic performance that tend to change direction before the
overall economy. These indicators include the Texas value of the dollar, the U.S. Leading Index, real oil price, oil well
permits, initial claims for unemployment insurance, Texas stock index, help wanted index, and average weekly hours
worked in manufacturing. The Index shows significant growth since 2009, but a recent dip from the end of 2014. This dip
is related to the impact of the fall in oil prices on the oil and gas industry across the state, and points towards potential
uncertainty in the state’s economic performance.
An analysis of sales tax receipts statewide also points to economic uncertainty. After 62 straight months of sales tax
growth, the state’s sales tax collections declined in both June and August of 2015. These declines are almost exclusively
attributed to the contraction of the oil and gas industry. In August, the state experienced a 33 percent reduction in sales
tax collections from the sale of equipment and services related to the oil and gas industry. Collections from retail, services,
construction, and restaurants continued to grow during the same period, however. The city’s sales tax collections slowed
in June and July to near 1 percent, but has since resumed the significant growth rates seen throughout FY 2015. The
reduction in statewide sales tax revenue shows uncertainty in the state economy, but the city’s gains show a trend of
continued growth.
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Figure 6: Texas Leading Index
140.0
130.0
120.0
110.0
100.0
90.0
80.0
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
Source: Federal Reserve Bank of Dallas
The economic outlook for the Metroplex is mostly positive. It has grown significantly since the end of the most recent
recession in 2009. The Dallas Fed’s business cycle indices show strong growth in both statistical areas within the Metroplex
(Figure 7). The indices are a gauge of the current state of the regional economy. The rate of increase in the indices appears
to have grown over the last couple years, showing that the economy is performing well. Additionally, the Dallas-PlanoIrving statistical area appears to be outperforming that of the Fort Worth-Arlington statistical area. Based upon these
trends and the projections for growth in the Texas economy, the regional economy is expected to continue to grow,
though there is some uncertainty in the economy.
Figure 7: Dallas-Plano-Irving and Fort Worth-Arlington Business Cycle Indices
450
400
350
300
250
200
150
100
50
1981
1984
1987
1990
1993
1996
1999
Dallas-Plano-Irving
2002
2005
2008
2011
2014
Fort Worth-Arlington
Source: Federal Reserve Bank of Dallas
Looking specifically at local governments, Moody’s Investor Service projects a stable outlook for local governments across
the nation in its 2015 US Local Government Outlook. They anticipate an average growth in property tax receipts of
between two and three percent. They do not anticipate a return to the five percent annual growth experienced prior to
the most recent recession. Property tax receipts tend to lag behind fluctuations in the real estate market, so annual
increases of property tax receipts are likely to continue as housing prices have increased over the last few years.
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Moody’s warns that fixed costs, including debt, capital expenditures, pensions, and retiree health care are expected to
consume an increasing share of local government budgets over the next several years. They also expect an upcoming need
for local governments to invest significant funds into infrastructure. Since 2008 the average age of fixed assets has
increased by nine percent, nationwide. Eventually, funding will be needed to maintain and improve assets. Moody’s does
not expect capital investments and borrowing to reach its historical average over the next few years. When it does return
to its average, it will test local governments’ ability to maintain financial balance.
Overall, the economic outlook for Irving is positive, as the U.S., Texas, and regional economies continue to grow and
property tax receipts return to consistent growth. There are some factors of uncertainty in the economy, but it is too early
to project any economic contractions.
Employment
Both the CBO and Wells Fargo project the unemployment rate to fall nationwide. The CBO expects the unemployment
rate to decline from an average of 6.2 percent in 2014 to 5.3 percent by 2017. In addition to a decline in unemployment,
labor force participation by those who temporarily left the labor force or stayed out of the labor force is expected to
increase over the next few years. Wells Fargo Securities also references household survey data to show that most of the
jobs added in the past year have been full-time positions.
In Texas, the unemployment rate has also continued to fall. It is anticipated to remain below 5 percent for the next several
years. The estimated statewide unemployment rate in 2014 was 4.9 percent. As the unemployment rate has fallen,
employment in the state has grown significantly (Figures 8 and 9).The Texas Comptroller expects continued employment
growth near 2 percent annually over the next few years. This growth has and will continue to occur in a variety of
industries.
Figure 8: Texas Employment Growth
4.0%
3.0%
3.3%
3.3%
2.9%
2.6%
2.9%
3.4%
2.2%
2.1%
2.2%
2.3%
2016
2017
2.0%
1.9%
1.0%
0.3%
0.0%
-1.0%
-2.0%
-3.0%
-2.8%
-4.0%
2005
2006
2007
2008
2009
2010
2011
Actual
2012
2013
2014
2015
Projected
Sources: U.S. Bureau of Labor Statistics; Texas Biennial Revenue Estimate—2016-2017 Biennium
In Irving, employment has been growing since 2010. The city has largely matched the employment growth of the
Metroplex over this period with the exception of 2010, when the city experienced a much larger increase. From the end
of the most recent recession in 2009 through 2014, the city has added nearly 20,000 jobs, an increase of almost 20 percent.
Future employment growth in Irving is projected to match the Texas Comptroller’s projection for the state, averaging near
two percent annually over the next few years. Employment growth in the city is an indicator of economic growth, demand
for business development, demand for housing, and wage growth. It can also have an impact on the demand for city
services and infrastructure needs.
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Figure 9: Annual Change in Employment – Irving and Dallas-Fort Worth-Arlington
10.0%
9.2%
8.0%
6.0%
4.0%
2.3% 2.4%
1.3%
3.3%
2.3%
2.2%
2.0%
1.9%
0.0%
-2.0%
-4.0%
-6.0%
2005
2006
2007
2008
2009
2010
2011
Dallas-Fort Worth-Arlington
2012
2013
Irving
2014
2015
2016
2017
Projection (Texas)
Sources: U.S. Bureau of Labor Statistics; Texas Biennial Revenue Estimate—2016-2017 Biennium
As employment has grown, unemployment rates in the city have fallen. BLS data shows that the unemployment rate in
the Metroplex has fallen from a high of 8.2 percent in 2010 to an estimated 5.1 percent in 2014—a decrease of 3.1
percentage points (Figure 10). Irving is performing better with a preliminary unemployment rate of 4.6 percent in 2014,
down 3.0 percentage points from a high of 7.6 percent. This decrease in unemployment has occurred while the city added
approximately 20,000 residents. Based upon projections for the national and state economy and current trends in the
Metroplex, the unemployment rate in Irving is projected to remain at or below five percent over short-term and average
five percent over the long-term.
Figure 10: Annual Unemployment Rate – Irving and the Metroplex
9.0%
7.6%
8.0%
7.2%
7.0%
6.3%
6.0%
5.8%
5.0%
4.6%
4.6%
4.0%
5.0%
4.8%
4.7%
4.9%
5.0%
3.0%
2.0%
1.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Dallas-Fort Worth-Arlington
Irving
Projection
Source: U.S. Bureau of Labor Statistics
Taken together, the employment growth in the region and reduction in the unemployment rate show that the regional
economy is growing and effectively absorbing significant population growth.
Personal Income and Wages
As unemployment remains low and employment continues to grow, firms will begin to compete for labor, driving increases
in wages. Across the U.S., the CBO projects that the Employment Cost Index for wages and salaries of workers in private
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industries will increase by nearly three percent annually from 2015 through 2025. This is a faster rate of growth than has
been experienced since the end of the most recent recession.
In Texas, personal income has been growing since 2010 (Figure 11). Annual growth reached a high of 9.5 percent in 2011,
and has settled near four percent. The Texas Comptroller projects personal income growth to slow to 3.7 percent in 2015
and increase to 6.6 percent by 2017. Projections for personal income growth may outpace wage growth, as personal
income includes additional income sources besides wages.
Figure 11: Annual Change in Personal Income in Texas
12.0%
10.0%
10.0%
9.5%
10.0%
7.8%
8.0%
7.0%
6.6%
5.5%
6.0%
4.8%
6.2%
4.0%
4.6%
1.7%
2.0%
3.7%
0.0%
-2.0%
-2.4%
-4.0%
2005
2006
2007
2008
2009
2010
2011
Texas
2012
2013
2014
2015
2016
2017
Projection
Source: Texas Biennial Revenue Estimate—2016-2017 Biennium
Locally, wages have grown since 2009 (Figure 12). Average weekly wages in the Dallas-Plano-Irving metropolitan area have
increased by an average of 3.1 percent annually since the end of the most recent recession in 2009. This rise in average
weekly wages can be attributed to two trends: rising wages and increasing full-time employment. Wells Fargo references
nationwide household survey data to show that most of the jobs added in the past year have been full-time positions.
Staff anticipates annual wage growth in the Dallas-Plano-Irving metropolitan area to continue to average 3.1 percent for
the next few years, though it may increase to match the Texas Comptroller’s projection for personal income growth.
Figure 12: Annual Change in Average Weekly Wages – Dallas-Plano-Irving
6.0%
5.1%
4.4%
4.2%
3.5%
4.0%
3.1%
1.5%
2.0%
0.2%
0.0%
-2.0%
-4.0%
-6.0%
-5.4%
2008
2009
2010
2011
Dallas-Plano-Irving
2012
Average Since 2009
Source: U.S. Bureau of Labor Statistics
12
2013
2014
Increases to personal income and wages are expected to have two impacts on the city: higher labor costs and growth in
consumer spending. As wages increase throughout the region, the city’s labor costs are likely to increase in order to remain
competitive and attract and retain a high quality workforce.
Consumer spending is also expected to grow, as wages and personal income rise. Growth in personal income is anticipated
to outpace inflation, resulting in an increase to discretionary income. The CBO projects consumer spending to increase by
3.3 percent in 2015 and continue to grow through 2019 at slower rates. Wells Fargo projects lower growth between 2.0
and 2.5 percent for 2015. Lower energy prices may also contribute to higher consumer spending. However, the higher
interest rates expected over the next few years may slow consumer spending.
Overall, wages are expected to increase over the next few years, driving growth in consumer spending. This may impact
the city’s sales tax receipts.
Inflation
In the Metroplex, the inflation rate, as measured by the Consumer Price Index (CPI), has remained low over the last few
years (
Figure 13), performing similarly to the average inflation rate for the nation. In 2014, the preliminary change in the CPI for
the Dallas-Fort Worth metropolitan area was 0.8 percent.
The CBO projects the average nationwide inflation rate will begin to increase in 2015, settling near the Fed’s target rate
in 2017. The Fed is expected to increase interest rates over the next several years to promote the target inflation rate.
Staff assumes that the local inflation rate will follow a similar trend to the CBO’s nationwide projection.
Beyond 2017, inflation is projected to average the target rate. The Fed’s target rate is estimated to be a 2.3 percent annual
increase in the CPI. This rate is consistent with the 20-year average inflation rate in the Metroplex.
Figure 13: Annual Change in Consumer Price Index – Dallas-Fort Worth
5.0%
4.2%
4.4%
4.0%
3.4%
3.1%
3.0%
2.1%
1.8%
2.0%
1.0%
1.3%
1.4%
2.3%
1.6%
1.7%
0.8%
0.0%
-1.0%
2000
-0.6%
2002
2004
2006
2008
2010
Dallas-Fort Worth
2012
2014
2016
2018
2020
Projection (U.S.)
Sources: U.S. Bureau of Labor Statistics; CBO – The Budget and Economic Outlook 2015 to 2025
Changes to the CPI in the Metroplex have a direct impact on the city’s revenues and expenditures. The rate of inflation
can indicate increased costs for a variety of materials the city purchases regularly, as well as services. Inflation also
increases revenues and diminishes the value of revenues at the same time. For an increase in revenues to benefit the city,
the growth must be greater than the inflation rate.
13
Residential Real Estate
The residential real estate market is expected to continue to grow over the next several years. Nationwide, the CBO
projects an 11 percent increase in residential real estate investment in 2015, followed by a 13 percent increase in 2016.
In Irving, median home sale prices are on the rise (Figure 14). In 2012 and 2013, the median home sale value in the city
experienced double digit annual increases. From 2009 to 2014, the median sale price for a home in Irving increased by
nearly 40 percent. Annual growth returned to a more reasonable rate of 3.5 percent in 2014. In addition to strong growth
trends, the months of supply of homes for sale in Irving has been falling. It reached a high of 7.5 months in 2010 and has
fallen to a low of 2.4 months in 2014. The months of supply of homes for sale is an estimate of the length of time it would
take to sell all homes currently on the market if no additional homes were placed on the market. It is an indicator of strong
demand for housing. Based upon months of supply and median sale price trends, home values are projected to continue
to rise.
Figure 14: Irving Median Home Sale Price
$225,000
$194,100
$200,000
$175,000
$150,000
$138,900
$121,200
$125,000
$98,200
$100,000
$75,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Texas A&M University Real Estate Center
The rate of growth in home values is likely to slow from the current trend. As interest rates increase over the next several
years, demand for housing is likely to slow. Additionally, new housing may increase supply slowing the growth of sales
prices for existing homes. Slower housing appreciation rates may protect a key factor in attracting businesses and people
to Texas—affordability. Overall, the median home sale price in Irving has nearly doubled in the last 15 years, and there is
no reason to expect a slower growth rate over the next 15 to 20 years.
With strong demand for housing, new home construction is expected to increase. The Texas Comptroller projects an 18
percent increase in single family home permits statewide in 2015. Wells Fargo projects a 13.7 percent increase in new
home starts nationwide in 2015, compared to a 6.0 percent increase in 2014. These increases in single family home
building are expected to impact Irving. Since 2010, the city has experienced annual increases in single family and
townhouse permits (Figure 15). In 2013 and 2014, the number of permits increased by 4 and 6 percent, respectively.
Demand for single family homes is expected to continue, though developable land in the city will become scarce.
14
Figure 15: Annual Change in Single Family Building Permits
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
2007
2008
2009
Irving
2010
2011
Dallas-Fort Worth-Arlington
2012
2013
2014
Texas
Sources: Irving Inspections Department; Texas A&M University Real Estate Center
The multifamily housing market is projected to slow over the next few years. In 2014, the multifamily housing boom
associated primarily with apartments remained strong. Both Integra Realty Resources and Wells Fargo Securities project
that the apartment market will reach its peak over the next 1 to 3 years. There was a small increase in vacancy rates and
stagnant capitalization rates in 2014. Additionally, a substantial amount of supply is expected to be completed in 2015.
These trends may put downward pressure on prices and slow rental growth rates. The city will likely continue to see
modest growth in multifamily starts that may slow over the next several years. These trends will impact apartment
construction, but are not likely to impact demand for townhouses or condominiums.
Looking at overall trends in the real estate market, Wells Fargo Securities anticipates homeownership rates to increase
over the next several years. Wells Fargo does not expect a sustained reduction in home ownership rates from the
“Millennial” generation. They are expected to own homes at similar rates to prior generations.
In Irving, ownership rates have declined nearly five percentage points over the last 10 years. Currently, 64 percent of
housing units in Irving are renter occupied and 36 percent are owner occupied—the opposite of the composition of the
Metroplex. One reason for Irving’s lower home ownership rate is that 55 percent of housing units are in a structure with
3 or more units. Demographic factors may also impact these rates. The ownership rate in Irving may change depending
upon how vacant land is developed and existing properties are redeveloped.
Through 2040, the city will add more than 53,000 residents, 20,000 housing units, nearly 1,500 acres of developed land
for housing, and 500 acres of developed land for mixed-use (including housing components).
Commercial Real Estate
Continued growth and strong demand are expected in commercial real estate over the next several years. Nationwide,
the CBO projects business investments to increase by 4.3 percent in 2015 and 5.9 percent in 2016. Wells Fargo is projecting
an increase in business investment, especially in structures. Integra Realty Resources also projects an increase in new
commercial building, especially in the office sector, over the next few years.
Looking at the Metroplex, Cushman and Wakefield, a global real estate services firm, expects continued demand for office
space. They expect the trend of corporate relocations to North Texas to continue. Additionally, the large projects currently
underway in the Metroplex are expected to spur ancillary developments and attract a variety of business support services.
Rental rates in the office market have continued to increase through 2014, and vacancy rates have continued to fall. All
of this activity points to continued office development in the region, as well as Irving.
15
Wells Fargo Securities notes strong growth in industrial real estate in the Metroplex in 2014 that is expected to continue.
Vacancy rates have declined for several years. The region has experienced significant growth in the trade, transportation,
and utilities sector that has driven demand for industrial space. The Metroplex has become a popular location for large
distribution centers for major retailers. The trend of growth in industrial real estate is likely to continue, although it may
begin to slow.
Overall, strong demand for new commercial development in the Metroplex is expected to continue through the next
several years.
Summary
Demographic and economic trends point toward steady growth for Irving over the next 15 years. There will be periods of
significant growth and periods of economic contractions. It is impossible to predict when those periods will occur. The
projections provided are based upon averages, taking into account both strong growth and recessionary periods.
16
Revenue Analysis
A number of financial indicators and analysis reports were analyzed to determine the historical trends, which are used as
predictors of future changes in the city’s revenue streams. The analysis of these indicators is designed to present
information on the fiscal health of the city. This revenue trend analysis focuses primarily on the city's General Fund.
Enterprise funds, including the Water and Sewer System Fund, Solid Waste Services Fund, and Municipal Drainage Fund
are reviewed under different analyses and other planning documents—staff intends to include these other major funds
in future planning years.
Revenue Trend Analysis
Figure 16 shows changes in General Fund revenue since 2000. Included in each year’s total are the various categories of
General Fund revenue sources: Property Tax, Sales Tax, Franchise Fees, License, Permits, and Fees, Fines, Forfeitures, and
Penalties, Transfers into the General Fund (Transfers In), Charges for Services, and “Other”. Transfers In includes those
transfers from enterprise funds for administrative expenses as well as bond funds used to pay for partial salaries and
benefits of staff associated with project development. “Other” revenue includes interest income, contributions for
employees, and miscellaneous revenues.
Figure 16: General Fund Revenues (in millions)
$188
$190
$184
$181
$179
$180
$172
$170
$171 $171
$162
$160
$154
$148
$150
$141
$137 $137
$140
$130
$133
$130
$120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Figure 17 shows a comparison of operating revenue for FY 2005 and FY 2014. Overall, the General Fund continues to be
supported primarily by property and sales tax revenues. The overall percent for these two categories increased from 66%
in FY 2005 to 73% in FY 2014. Charges for Services has been reduced from approximately 6% to less than 1% of General
Fund revenues. The primary driver of this reduction is the movement of Solid Waste Services to an enterprise fund in
2010.
17
Figure 17: Source of General Fund Revenues
Charges for
Service
6%
Transfers In
FY 2005
FY 2014
Fines,
Forfeitures,
and
Licenses,Penalties
Permits, 3%
Other
2%
Fines, 6%
Forfeitures,
and
Penalties
6%
Licenses,
Permits, Franchise
and Fees
Fees
3%
11%
Transfers In
6%
Charges for
Service
0%
and Fees
5%
Property
Taxes
38%
Other
2%
Franchise
Fees
11%
Property
Taxes
42%
Sales Tax
31%
Sales Tax
28%
Revenues per Capita
Actual revenues per capita (Figure 18) experienced a steady increase through FY 2009, after which it decreased
significantly due to the national recession and sharp declines in key revenues. The two main revenues supporting the
General Fund, property taxes and sales taxes, both declined significantly as a result of the economic contraction and a
decline in consumer spending. From a peak valuation of $18.45 billion in FY 2009, values dropped to a low of $16.53 billion
in FY 2012, a reduction of $1.92 billion. Not until the FY 2015 did total taxable property values exceed the $18.45 billion
taxable valuation reached before the recession. Revenues per capita, in actual dollars, experienced a decrease in FY 2010
of 13.0%, from $861 to $749 per capita. Revenues per capita have since increased by 8.0% to $809.
Figure 18: General Fund Revenue per Capita
250,000
$856
$833
225,000
200,381
203,760 206,360
209,462
$861
213,477 216,290
219,917
228,653
$875
$790
$779
$758
232,700
$825
$809
200,000
175,000
225,547
$775
$759
$749
$736
$725
150,000
$675
2005
2006
2007
2008
2009
Population
2010
2011
2012
2013
2014
Revenue Per Capita
Property Tax Revenues
Property, or ad valorem, taxes (Figure 19) are assessed on all real and personal property as of January 1 of each year. The
total tax rate of $0.5941 per $100 of valuation for FY 2015 was set by City Council when the budget was adopted. The
annual budget and tax rate are established by separate ordinances. The total tax rate is adopted in two parts with the
majority of revenues deposited in the General Fund for operations and maintenance expenses and the remainder
allocated to pay the current year’s portion of general debt service.
18
The City’s tax base is significantly commercial in nature with over 70% of its taxable value from commercial property and
business personal property. As a result, Irving’s tax base is more heavily affected by changes in the economy when
compared to other cities in the region. Valuation of office buildings are tied to vacancy rates and rental rates, which are
sensitive to changes in economic activity. Residential values also declined slightly during the recession. However, since
North Texas did not experience the housing price bubble that significantly impacted other areas of the nation, the declines
were smaller than those of commercial values. They have also not exhibited the cyclical increases and decreases in values
that follow the economic cycles as has been seen in Irving’s commercial values, and property values overall.
Figure 19: Property Tax Revenues (in millions)
$78.97
$80
$76.49
$74.64
$75
$71.28
$70
$72.56
$69.84
$70.23
2010
2011
$65.01
$65
$60
$55.90
$56.04
2005
2006
$55
$50
2007
2008
2009
2012
2013
2014
As illustrated in Figures 20 and 21, taxable property values reached a peak of $18.45 billion in FY 2009. Over the next three
years, values declined by a total of $1.9 billion to $16.53 billion in FY 2012. This decline reflects the impact of the national
recession on commercial property in the city, as the value of commercial real estate and inventories (business personal
properties) declined significantly. Property values have recovered steadily in the past three years with FY 2015 values
exceeding the peak of FY 2009, a six year recovery indicating the depth and duration of the recession on property values.
Figure 20: Comparison of Total Assessed Valuation, Tax Rate and Levy
Fiscal
Total Assessed
% Change of
Year
Valuation
Tax Rate
Valuation
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
13,785,277,690
14,033,622,526
15,424,989,297
17,551,283,405
18,451,730,087
17,827,599,240
16,908,697,223
16,531,748,675
17,312,693,245
18,074,999,485
19,288,476,960
19
$0.5479
$0.5479
$0.5479
$0.5406
$0.5406
$0.5406
$0.5761
$0.5986
$0.5986
$0.5986
$0.5941
-0.9%
1.8%
9.9%
13.8%
5.1%
-3.4%
-5.2%
-2.2%
4.7%
4.4%
6.7%
Figure 21: Assessed Property Valuation History (in billions)
$22
$20
$17.5
$18
$16
$19.3
$18.5
$17.8
$16.9
$16.5
$17.3
$18.1
$15.4
$14.0
$14
$12
$12.6
$10
$8
$9.8
$13.5
$12.8
$11.9
$11.6
$5.0
$5.0
$4.9
2010
2011
Residential
$10.9
$12.4
$14.0
$13.1
$6
$4
$4.2
$4.5
2006
2007
$4.9
$5.0
$4.9
$5.0
$5.3
2012
2013
Commercial
2014
2015
$2
2008
2009
Total Taxable Value
The largest increase in property values for FY 2015 was in commercial real estate, which increased by 9.87% to $9.2 billion
in taxable value. Business Personal Property values increased by 1.86% to $4.8 billion. Residential values had an increase
of 6%, raising values to just under $5.3 billion. This year’s increase comes from both increasing values of existing properties
as well as from new construction.
New construction for FY 2015 totaled $337.7 million, with commercial construction accounting for $176.5 million. New
residential construction accounted for the rest of new construction values at $161 million. Residential construction
includes the development of several new single-family neighborhoods and is expected to continue in the next few years.
The average value of new single-family homes is well above the average value of existing homes in Irving, showing strength
in the residential market.
Future property tax revenue projections (Figure 22) are based on a 9.8% increase in FY 2016 as provided by the Dallas
County Appraisal District (DCAD) based on the certified roll with a 2.0% increase thereafter. This falls in line with the 2.0%
growth projection used in calculations with bond rating agencies and is reasonable in light of our 3.6% growth rate in
taxable values experienced over the past 10 years.
Figure 22: Property Tax Revenue Projection (in millions)
$140
$130
$120
$110
$100
$90
$80
$96.7
$129.9
$124.8 $127.3
$122.4
$120.0
$115.3 $117.6
$113.1
$110.9
$106.5 $108.7
$104.5
$100.4 $102.4
$85.8
$70
$60
$50
$40
2015
2016
2017
2018
2019
2020
2021
2022
20
2023
2024
2025
2026
2027
2028
2029
2030
Sales Tax Revenues
Consumer sales taxes are collected by the state from the sale of goods and services. The General Fund receives 1% of each
dollar taxed in the city. The State of Texas collects 6.25%, and an additional 1% of local sales tax is allocated to the Dallas
Area Rapid Transit system (DART). Sales tax revenues are the second largest source of General Fund revenues at 30%.
Sales tax revenue is extremely unpredictable, being entirely dependent on consumer shopping patterns and business to
business spending. Figure 23 shows sales and use tax receipts, including amounts for liquor taxes.
Historically, sales tax collections had been reliably increasing each year in the 1980s and 1990s as the city expanded and
new commercial development was opened. The last two national recessions, which began in 2001 and 2007 revealed that
sales tax revenue was no longer insulated from economic cycles. FY 2001 saw the beginning of a marked decline in sales
tax coincident with the national recession. From a peak of $45.1 million collected in FY 2000, FY 2003 sales tax collections
were only $36.29 million, a decrease in excess of $8.7 million dollars, or 18.1%. Subsequent years showed a marked
recovery in sales taxes as the local economy recovered from the recession. FY 2008 revenues were the highest the city
had received, at $50.65 million. A similar decline in sales tax revenues occurred with the next recession, with revenues
declining by $6 million or 12.4% over the next two years. Recovery in sales tax revenue has been robust as revenues
exceeded the previous high in FY 2013 and have continued to increase with revenues for FY 2014 exceeding $58 million.
Figure 23: Sales Tax Collection History (in millions)
$60
$58.00
$55
$52.39
$50.65
$50
$48.26 $48.12
$47.39
$46.90
$45.10
$45
$45.74
$44.37
$44.31
$41.82
$40
$38.65
$38.08
$36.29
$35
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
The history of the last fifteen years illustrates the volatile nature of sales tax collections and their susceptibility to changes
in the overall economy. Monthly sales tax collections are monitored closely to determine trends and their impact on the
overall general revenue stream. The city contracts with a consultant to analyze sales tax revenue in detail. Projections
through FY 2019 are based on this analysis. FY 2020 through 2030 are based on a 20-year history indicating an average
annual increase of 3.24%. This projection is also in line with population, employment, and income growth as well as the
local inflation rate.
21
Figure 24: Sales Tax Projection (in millions)
$125
$100
$75
$50
$110.66
$103.82 $107.19
$114.24 $117.95
$97.41 $100.56
$91.39 $94.35
$88.52
$109.12
$83.05 $85.74
$102.38 $105.70
$99.17
$77.59
$96.06
$72.11
$90.12 $93.04
$66.88
$87.29
$84.55
$61.45
$79.33 $81.90
$73.14 $76.84
$69.25
$65.44
$60.85
$25
$2015
2016
2017
2018
2019
2020
2021
2022
Pessimistic
2023
2024
2025
2026
2027
2028
2029
2030
Most Likely
Other General Fund Revenues
In addition to property and sales tax revenues, General Fund revenues include Franchise Fees, License, Permits, and Fees,
Fines, Forfeitures, and Penalties, Transfers In, Charges for Services, and various others (Figure 25).
Franchise Fees
Franchise fees comprise the third largest source of General Fund revenue at 11% in FY 2014. These fees are collected
primarily from utilities and are fees charged for the privilege of continued use of public property and municipal rights of
way to provide utility services to residents. The fees are calculated based on actual revenues generated by the utilities
within the City, or, in the case of electric power and telecommunications, using rates per customer that are set state-wide
by the Texas Public Utility Commission. In FY 2009 there was an anomalous increase in franchise fee revenues directly
related to a single utility provider whose payment schedule was switched from annual payments to quarterly payments.
Licenses, Permits, and Fees
Zoning and Development fees comprise a major portion of this category. Other significant sources include recreation fees
as well as the ambulance fee and emergency medical service fee.
Fines, Forfeitures, and Penalties
The majority of revenue in this category is generated by various Municipal Court fines and fees. Other fees included in this
category are wrecker fees, towing fees, animal shelter fees, mowing charges, library fees, and building and standards civil
penalties.
Transfers In
The majority of transfers in are from both the Water and Sewer System Fund and the Solid Waste Services Fund to account
for administrative services provided to these enterprise funds by General Fund departments. The transfer from the Water
and Sewer System did not take place in FY 2007. With the conclusion of operations at Texas Stadium, the last transfer of
remaining operating dollars from the Texas Stadium Fund (not to be confused with the current lease of the Texas Stadium
area) was made in FY 2012.
Charges for Services
This category currently consists of revenues generated for building and shelter rentals, the use of city-owned swimming
pools and athletic facilities, and recreation center participation. It should be noted that for financial reporting purposes,
Recreation Center Funds are considered part of the General Fund (as shown in the Consolidated Annual Financial Report).
Prior to FY 2010 this category also included charges for refuse collection and landfill operations which are now part of the
Solid Waste Services Fund.
22
Other
Interest income remains at historic lows due to continued low interest rates dictated by Federal Reserve policy. Funds not
required for current expenditures are invested in interest bearing accounts, local government investment pools, and
treasury and agency securities. The City is restricted in the types and duration of investments available by the Public Funds
Investment Act, which regulates the investment activities of political subdivisions of the State of Texas.
Also included in this category are cost reimbursements, the sale of goods, miscellaneous revenues, and the rental of cityowned facilities (other than those used for recreational purposes). In FY 2007 this category also included the receipt of
gas lease proceeds. Aside from that year, the city does not receive or record gas well proceeds.
Figure 25: Other General Fund Revenues History (in millions)
$30
$25
$20
$15
$10
$5
$2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Franchise Fees
Licenses, Permits, and Fees
Fines, Forfeitures, and Penalties
Transfers In
Charges for Service
Other
Based on a review of historical trends, removing the anomalies of one-time events, other General Fund revenue sources
are projected to remain relatively flat (Figure 26), or in some cases, with moderate increases through 2030. It is anticipated
that transfers from the Solid Waste Services Fund will decline over the next few years until the transfer in more in line
with that of other funds providing a similar transfer.
Figure 26: Other General Fund Revenues Projection (in millions)
$25
$20
$15
$10
$5
$2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Franchise Fees
Licenses, Permits, and Fees
Fines, Forfeitures, and Penalties
Transfers In
Charges for Service
Other
23
2030
General Fund Revenues Combined
Looking towards the future (Figure 27), with all elements factored in, staff projects steady increases in General Fund
revenues over the next 15 years. While this is a fairly straight line approach, there will undoubtedly be significant
deviations, both up and down, in the future.
The city’s consultant assisting with sales tax projections has performed an optimistic, most likely, and pessimistic
projection for sales tax revenue. Staff utilized the most likely projection for the total revenue projection. The optimistic
and pessimistic estimates are approximately 3% above and below the most likely.
Figure 27: General Fund Revenues Projection (in millions)
$350
$300
$250
$200.0
$312.5
$298.0 $305.1
$291.0
$284.2
$271.1 $277.6
$258.7 $264.8
$252.7
$246.9
$232.8 $241.2
$225.0
$215.7
$200
$150
$100
$50
$0
2015
2016
2017
2018
2019
2020
2021
2022
2023
Most Likely
24
2024
2025
2026
2027
2028
2029
2030
Expenditure Analysis
The Expenditure Analysis evaluates the fiscal health of the city from the perspective of how the city expends its financial
resources. It includes a 15-year historical trend analysis of increases and decreases in expenditures, as well as a 15-year
projection of future expenditures. To identify trends and projections, staff used data from the City’s Comprehensive
Annual Financial Report (CAFR), Operating Budget, Capital Improvement Plan (CIP), and Five-Year Strategic Business Plan.
The Expenditure Analysis focuses primarily on the city's General Fund, as enterprise funds (including the Water and Sewer
System Fund, Solid Waste Services Fund, and Municipal Drainage Utility Fund) are reviewed in different analyses and
planning documents.
Each year, the city’s budget process aligns the city’s financial situation, operational needs, strategic goals, and City Council
priorities to allocate limited resources. The many variables in this process cannot be fully accounted for in the 15-year
expenditure projection. Therefore, the base projection builds upon historical trends and subject-matter expert input,
assuming no changes in service levels. It shows the current direction of the city’s expenditures. The total projection
includes anticipated service level changes over the short-term, such as the additions of Fire Station 12 and Medic 1.
General Fund Expenditure Trend
The General Fund is the city’s main operating fund, receiving revenues from a variety of sources and funding a wide range
of governmental activities. It is the primary method of funding the city’s most critical and basic services, using the city’s
tax levying authority.
Solid Waste Services was included in the General Fund until FY 2010, when it was transitioned to an independent
enterprise fund. Staff has removed all Solid Waste Services expenditures from the General Fund expenditure history for
this analysis.
General Fund expenditures (Figure 28) typically increase each year, as inflation increases the costs of labor, services, and
materials to the city. Additionally, population increases will also drive expenditures. From FY 2000 to FY 2009,
expenditures increased by an average of more than four percent per year. This growth was greater than the average
annual change in CPI during the same period (2.4 percent). The difference between rate of increase for expenditures and
the inflation rate may be indicative of City Council decisions to fund service-level enhancements and the overall population
growth of 13 percent.
Figure 28: General Fund Actual Expenditures FY 2000 through FY 2014 (in millions)
$200.0
$190.0
$184.5
$173.0 $176.0 $170.8
$180.0
$170.0
$163.4
$174.2
$166.9
$160.0
$150.0
$140.0
$130.0
$169.7
$135.9
$124.4
$119.5
$144.2
$138.1
$133.2
$130.5
$120.0
$110.0
$100.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
25
Starting in FY 2010, however, expenditures began to decrease due to the national recession from 2007 to 2009. The
recession reduced the total taxable property value in the city by $1.9 billion, beginning in FY 2010, due to the lag between
changes in real estate values and changes to taxable property values. As revenues decreased, the city cut expenditures to
create a structurally balanced budget. Expenditures were reduced through several initiatives, including process and service
efficiency initiatives, holding positions vacant, and reducing spending in several other areas. Expenditures decreased from
a high of $176.0 million to a low of $166.9 million, an average annual decrease of 1.7 percent.
As the economy has steadily recovered, the city’s revenues and expenditures have begun to increase. In FY 2013,
expenditures increased by 4.4 percent, followed by a 5.9 percent increase in FY 2014. A portion of these increases has
been dedicated to restoring positions and resources that were previously scaled back. Overall, the General Fund has
averaged a 3.3 percent annual increase from FY 2000 to FY 2014, while the median annual increase was 3.9 percent. FY
2014 was the first year in 5 years that General Fund expenditures exceeded pre-recession expenditures.
The FY 2015 adopted budget for the General Fund was $195.6 million. This represents an $11.1 million increase over FY
2014 actual expenditures, or 6 percent. The largest component of the increase was salary and benefit increases for current
employees and retirees. For non-personnel expenses, the largest increases were for additional contributions to the TIF
fund due to increases in property values within TIF 1, for maintenance for the Motorola communications system, for the
street overlay program, and for taking over the operations of the North Lake Natatorium. Increases in revenues allowed
for several held vacant positions to be filled and new positions approved to meet identified needs for expanded services,
especially those related to the SH 183 project.
Expenditure Classification
The General Fund expends resources in a variety of classifications (Figure 29). As the city is a service-providing
organization, the largest portion of General Fund expenditures are associated with personnel costs. The largest
classification of expenditures is salaries, followed by benefits. In FY 2014, the salary and benefits classifications
represented 70.1 percent of General Fund expenditures. This is a lower proportion than in FY 2005, when it represented
74.3 percent. This decrease may be due to efficiency efforts and other cost-saving initiatives during the recession.
Figure 29: Expenditures by Classification
FY 2005
FY 2014
1% 3%
0%
7%
21%
22%
55%
59%
16%
16%
Salaries
Benefits
Salaries
Benefits
Operating Expenditures
Capital Expenditures
Operating Expenditures
Capital Expenditures
Transfers Out
Transfers Out
The other main classifications of expenditures are operating expenditures (including supplies, maintenance, utilities,
outside services, contractual rebates, and miscellaneous), transfers, and capital expenditures (Figure 29). The most
significant changes in expenditures between FY 2005 and FY 2014 are related to contractual rebates and transfers.
Contractual rebate payments have increased from 3.4 percent of the General Fund to approximately 4.5 percent. This
26
increase is the result of economic development incentive contracts that require the city to rebate a portion of revenues
to employers or developers who achieve specified increases in property valuation, employment, or sales tax generation.
Additionally, transfers out increased from 3.4 percent of expenditures to 7.4 percent, due largely to growth in property
tax revenue from TIF 1 that is reimbursed to the TIF Fund.
Expenditures Per Capita
Expenditures per capita is one important way to analyze the stability of General Fund expenditure growth. As the city’s
population grows, General Fund expenditures are likely to grow as well to meet the increased demand for services.
Analyzing expenditures per capita is one way to control for the effects of population growth on expenditures. It can be
one indicator that expenditures are growing too quickly or not quickly enough to be sustainable, but must also be
considered with other information.
Actual expenditures per capita (Figure 30) steadily increased from FY 2000 through FY 2006, averaging 2.2 percent per
year. This mostly aligns with annual inflation rates. In FY 2007 and FY 2008, the growth rate in expenditures per capita
increased to an annual average of 8.1 percent. After FY 2008, expenditures per capita decreased significantly, due to a
combination of the national recession, significant cost-saving initiatives, and moving personnel and expenditures to other
funds. Expenditures per capita fell from a high of $826 to a low of $740 in FY 2012, a decrease of 10.4 percent. Since FY
2012, actual General Fund expenditures have increased by an average of 3.5 percent per year. This slightly higher rate of
growth can be attributed to returning personnel and expenditures to the General Fund that were moved out.
Figure 30: General Fund Expenditures Per Capita
$900
240,000
230,000
$850
$826
220,000
$824
$793
$800
$792
$790
$772
$750
200,000
$762
$740
$700
$708
$690
$600
170,000
$670
$659
$624
190,000
180,000
$689
$650
210,000
160,000
$635
150,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Population
Expenditures Per Capita
Personnel Expenditures
Personnel expenditures comprise the largest proportion of General Fund expenditures, accounting for 70.1 percent of
actual expenditures in FY 2014. As the largest portion of expenditures, it is important to understand trends in the growth
of authorized personnel, salaries, and benefits.
Authorized Personnel
From FY 2000 to FY 2015, the number of authorized personnel in all funds increased from 2,032 to 2204, a change of 8.5
percent (Figure 31). While the total number of authorized personnel has increased, the proportion of authorized personnel
per 1,000 population has declined from 10.6 to 9.3.
Looking at the General Fund specifically, authorized personnel have declined from 1,840 to 1,744. This decline in
authorized personnel can be attributed to several actions. First, the city established an independent enterprise fund for
Solid Waste Services in FY 2010, removing approximately 90 Solid Waste Services employees from the General Fund. The
27
city also initiated cost-savings efforts during the recession that resulted in the elimination of several positions and in
holding many more vacant. Lastly, some positions were moved out of the General Fund and paid from other funds (see
the growth in the Municipal Drainage Utility Fund and Other Funds in Figure 31).
Figure 31: Authorized Personnel
Fund
FY 2000 FY 2005 FY 2010
General Fund
1,840
1,831
1,764
Water and Sewer System Fund
137
160
168
Solid Waste Services Fund
*
*
90
Municipal Drainage Utility Fund
6
14
36
Other Funds
49
149
154
Total All Funds
2,032
2,154
2,212
FY 2015
1,744
155
97
41
167
2,204
FY 2016
1,858
157
97
41
150
2,303
* Solid Waste Services Personnel were moved from the General Fund to the Solid Waste Services
Fund in FY 2010.
The base expenditure projection (shown later in this section) may account for some minimal increase in authorized
personnel, but does not provide for significant growth in authorized personnel over the next 15 years. Staff did include
known increases in Authorized Personnel, including Fire Station 12 and Medic 1, in the total General Fund expenditure
projection. As the city’s population continues to grow, increases in authorized personnel will be required to maintain
service levels and ensure adequate public safety.
Salary and Benefit Expenditures
Salary expenditures have grown by $33.6 million over the last 15 years, an increase of 50 percent (Figure 32). The average
annual change in salary expenditures over the same period was 3.0 percent. During the most recent recession, salary
expenditures decreased by 3.6 percent, as the number of authorized personnel in the General Fund also decreased. Since
the economy has returned to growth and revenues have increased, the city has begun to fund additional personnel
through the General Fund, returning some authorized positions. Excluding the recessionary years of salary expenditure
decreases, the General Fund has averaged an annual growth of 4.1 percent in salary expenditures.
There are several components to General Fund salary expenditure increases. The city operates a pay plan for general
government employees and police and fire civil service employees. Built into these pay plans are annual step increases of
3.5 to 5.0 percent. These step increase are a key driver for increases to General Fund salary expenditures.
Additionally, the city strives to compensate employees near the 65th percentile of similarly-sized cities in the Metroplex.
Therefore, the city makes market adjustments to its pay plan from time to time to adjust salaries to remain competitive
in attracting and retaining a high performing workforce. In FY 2014 and FY 2015, the city funded partial-year market
increases for police and fire civil service employees. General government employees received a partial-year 2 percent cost
of living adjustment in FY 2015 and a partial-year 1.5 percent cost of living adjustment is planned for FY 2016. Increases
to General Fund salary expenditures also include changes to the pay structure.
28
Figure 32: General Fund Salary and Benefit Expenditures (in millions)
$140.0
$120.0
$100.0
$80.0
$15.4
$16.5
$21.4
$18.5 $19.6 $20.1
$25.2
$24.0 $25.1
$28.9
$26.2 $27.4 $29.2
$25.1 $25.1
$60.0
$40.0
$92.8 $97.8 $97.8 $94.6 $94.3 $96.9 $100.5
$81.3 $84.5 $87.5
$79.9
$78.7
$78.5
$66.9 $73.1
$20.0
$2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Salary
Benefits
General Fund benefit expenditures include life insurance, health insurance, unemployment taxes, Medicare taxes,
retirement benefits, and various employee allowances and reimbursements. Over last 15 years, benefit expenditures have
grown by $13.5 million dollars, an increase of 87.3 percent. The average annual increase to benefit expenditures over this
period was 4.8 percent. In FY 2012, benefit expenditures decreased, due largely to a significant reduction in the city’s
contribution rate to the Texas Municipal Retirement System (TMRS). Excluding this year of contraction, the average annual
increase was 6.3 percent.
The two largest drivers in benefit expenditures are the cost of health insurance and retirement benefits.
Health Insurance Expenditures
Health insurance costs represent nearly half of the city’s benefit expenditures. In FY 2000, health insurance comprised
36.5 percent of benefit expenditures, but that proportion has risen to 49.0 percent in FY 2014. Over this same period,
costs have risen from $5.6 million annually to $14.1 million, an increase of 151 percent (Figure 33). On average, General
Fund health insurance expenditures have increased by 7.3 percent annually. This has occurred while the number of
employees in the General Fund has decreased by nearly 100.
Figure 33: General Fund Health Insurance Expenditures (in millions)
$16.0
$14.1
$14.0
$12.7
$12.0
$10.4
$10.0
$8.2
$7.1
$8.0
$6.0
$5.6
$11.2
$10.1 $10.1
$10.9
$11.4
$11.9
$8.9
$7.9
$6.0
$4.0
$2.0
$2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Expenditures
29
The graph in Figure 33 shows a few years in which costs have decreased or remained relatively flat. These areas show
changes that have been made to the provisions of the health insurance plans to keep costs down. The city has eliminated
an HMO plan, increased employee contributions, increased out of pocket costs for employees, and changed retiree health
benefits to reduce costs. The city can continue to modify the health insurance plans to keep costs down. However, this
can affect the city’s ability to recruit and retain a high quality workforce.
It is unclear how federal health care reform will impact the city’s health insurance expenditures over the long term.
Retirement Benefit Expenditures
The other significant portion of benefit expenditures is retirement benefits. The city’s contributions to the Texas Municipal
Retirement System (TMRS), Firefighter Retirement and Relief Fund (FRRF), Supplemental Benefit Plan (SBP), part-time
employee Social Security (FICA), part-time employee deferred compensation (PARS 457), and a tax-deferred retirement
savings plan (401(a)) are combined to calculate total retirement benefit expenditures (Figure 34). As a percentage of total
benefits, retirement expenditures have decreased from 56 percent to 45 percent, due to cost-savings efforts and the rise
of health insurance costs.
Total retirement expenditures have increased from $8.6 million in FY 2000 to $12.9 million in FY 2014 (Figure 34), an
increase of 50.8 percent. This represents an average annual increase of 3.3 percent. As the chart in Figure 34 shows, the
city significantly reduced its contribution rate to retirement benefits in FY 2012. This was achieved by eliminating a 70
percent repeating COLA for retirees. The city has since reinstituted a 30 percent repeating COLA, increasing the
contribution rate slightly. Removing the decreases in contributions, retirement benefit expenditures have increased by an
annual average of 5.6 percent.
Figure 34: Retirement Benefit Expenditures (in millions)
$16.0
$14.5 $14.7 $14.9
$13.6
$14.0
$12.0
$10.0
$8.6
$9.3
$10.5
$9.9 $10.0
$11.1
$11.9
$12.9
$12.5
$11.9 $11.7
$8.0
$6.0
$4.0
$2.0
$2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TMRS
Fire
SBP
FICA
PARS 457
401(a)
Total
The city currently strives to maintain parity for retirement contribution rates between employees eligible for FRRF and
employees eligible for TMRS. To accomplish this, the city contributes the difference between the contribution rate for
FRRF and TMRS to the SBP for TMRS eligible employees. For FY 2015, the total retirement contribution rate is 15.65
percent. Staff anticipates this rate to remain mostly stable. Retirement expenditures, however, will continue to increase
as salaries grow.
A contributing factor to retirement benefit expenditures is the financial health of the city’s pension plans. TMRS, FRRF,
and SBP are all funded at a healthy level. One measure of pension fund health is the underfunded actuarial accrued liability
(UAAL), which shows the difference between the actuarial accrued liabilities (AAL) and the actuarial value of assets (AVA).
Essentially, the UAAL shows the difference between a projection of what is owed to employees and a projection of the
30
assets of the plan at a given point in time. A limitation of the measure is that it does not include the value of future
employee and city contributions to the pension plans.
Figure 35 shows the UAAL for all 3 of the city’s pension plans. It shows that both the FRRF and SBP have been reduced
since a high reached in 2012. Changes to both plans have improved, and are expected to continue to improve, the health
of the plans. TMRS decreased significantly from a high in 2009 to a low in 2012, but increased again in 2013. This is related
to the elimination of the repeating 70 percent COLA for retirees and reinstatement of a 30 percent repeating COLA. While
the city’s plans are underfunded, the city has reduced its liability and the plans are considered to be healthy.
Figure 35: Underfunded Actuarial Accrued Liability for Retirement Plans
Year
FRRF
TMRS
SBP
Total
12/31/2008
2009
2010
2011
2012
2013
$32,326,627
51,128,437
51,128,437
51,128,437
65,253,147
57,502,156
$62,311,096
70,884,109
11,321,979
4,945,284
(5,582,483)
21,996,906
$ 2,952,909
2,828,236
7,907,326
11,850,892
13,656,510
12,768,984
$ 97,590,632
124,840,782
70,357,742
67,924,613
73,327,174
92,268,046
Includes all city funds
Another measure of the health of the city’s retirement plans is the funded ratio. It compares the AVA of the plan to the
AAL to achieve a funding percentage. The FRRF has a funded ratio of 73.1 percent as of December 31, 2013, which has
been increasing. The SBP’s funded ratio is 78.9 percent and has also been increasing. TMRS has a funded ratio of 96.1
percent, which is down from over 100 percent due to the introduction of a 30 percent repeating COLA for retirees. With
FRRF and SBP increasing their funded ratios and TMRS near 100 percent, the city’s retirement plans appear to be healthy.
Other post-employment benefits (OPEBs) represent another unfunded liability for the city related to retirement benefits.
Specifically, the city offers retiree health benefits that do not currently have a specific funding mechanism. Employees
who retire from the city and meet certain criteria are eligible to remain on the city’s health insurance plans. These
expenses are incurred within the Health Self-Insurance Fund. Figure 36 shows that the city’s unfunded liability for retiree
health insurance has decreased significantly since 2007. This is largely due to a reduction in city contributions to health
insurance for retirees and other plan changes.
Figure 36: Unfunded Liability for Retiree Health Plan
Year
Retiree Health Plan
$52,330,932
12/31/2007
26,375,713
2009
26,507,441
2011
19,045,783
2013
Includes all city funds
Overall, retirement benefit expenditures are expected to increase in line with salaries. The city’s 3 pension plans appear
to be financially healthy, while unfunded liabilities for retiree health insurance are an area of potential concern.
Operating, Capital, and Transfer Expenditures
The remainder of expenditures can be categorized as operating, capital, and transfers. Operating expenditures include
supplies, maintenance, outside services, and other miscellaneous costs. Since FY 2000, operating expenditures have
increased by an average of 4.2 percent per year.
Capital expenditures within the General Fund include the purchase of equipment over a specified limit, renovations and
repairs to facilities, and some minor infrastructure development. Capital expenditures have fluctuated significantly over
the last 15 years based upon need and the availability of funding.
31
Transfers out of the General Fund include contributions to vehicle and equipment replacement, the Health Self-Insurance
Fund, the Compensated Absences Fund, and the Tax Increment Finance (TIF) Funds. Transfers have grown substantially,
totaling more than $13.6 million in FY 2014. This growth has been largely driven by the increase in property values in TIF
District 1 (TIF 1). As property values grow in TIF 1, the city transfers more revenue to the TIF Fund to be used on projects
within the TIF to promote development. The area of TIF 1 has experienced some of the highest growth in property values
in the city. Additionally, the city has created four more TIF districts that will begin to increase the transfer to the TIF Funds.
General Fund Expenditure Projection
Based upon these trends, evaluations of the city’s current financial direction, and subject matter expert input, staff has
developed a 15-year projection of actual General Fund expenditures. The projection assumes no change in service levels
and minimal change in authorized personnel through FY 2030, with the exception of the addition of Medic 1 and Fire
Station 12 in FY 2016.
Salary expenditures are projected to increase by 3.0 percent per year (Figure 37). This is based upon an analysis of the
average annual change in salary expenditures per employee from FY 2000 to FY 2014. The addition of employees for Medic
1 and Fire Station 12 inflate the increase over FY 2016 and FY 2017.
Figure 37: Salary Expenditure Projection
$180.0
$160.0
$140.0
$120.0
$92.8
$100.0
$78.5 $79.9
$80.0
$97.8 $94.3
$167.1
$157.6
$148.5
$140.0
$131.9
$124.2
$116.3
$108.0
$100.5
$84.5
$66.9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
$60.0
Actual Expenditures
Projected Expenditures
Total benefit expenditures are projected to increase by an average of 3.8 percent annually through 2030, rising to $62.6
million (Figure 38). Most benefit expenditures, including retirement benefits, are anticipated to increase by 3 percent per
year in line with salaries. Health insurance costs, however, are much more difficult to project and represent nearly half of
all benefit expenditures.
The city typically projects annual increases to health care costs at 10 percent. Looking at the trend over the last 15 years,
the General Fund has averaged 7.3 percent annual increases. These figures are not reliable for future projections,
however, because of the impacts of the federal Affordable Care Act (ACA) on health care costs. Several provisions of the
ACA may change the future landscape of health care spending. First and foremost, the “Cadillac Tax” provision of the ACA
penalizes health insurance plans that are deemed too generous. This is defined at specific dollar amounts for individuals
and families covered by a plan and escalates each year with an inflation factor. City Council has directed that changes be
made to the health insurance plans to comply with the ACA and prevent, to the greatest extent possible, paying penalties
to the federal government related to the “Cadillac Tax”.
Based upon this direction, the health insurance plans have been altered for FY 2016 and further changes are expected to
be made in subsequent years that will pass more costs to employees. By increasing deductibles and using high-efficiency
32
networks, health insurance costs are budgeted to increase by 6 percent for FY 2016. Over the following five years, staff
has calculated that the city’s health costs may increase by a maximum of 4 percent annually to remain under the “Cadillac
Tax” penalty. Therefore, staff projects that health insurance expenditures will increase by 4 percent each year through
2030. Over the long term, it is unknown how the ACA will impact health care inflation or how the “Cadillac Tax” provision
will be implemented or altered.
Figure 38: Benefit Expenditure Projection
$75.0
$60.0
$45.0
$37.8
$30.0
$15.0
$15.4
$18.5 $20.1
$24.0 $25.2
$27.4
$40.8
$44.3
$47.5
$50.9
$54.5
$58.4
$62.6
$28.9
$25.1
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
$-
Actual Expenditures
Projected Expenditures
Operating expenditures are expected to grow by 4.6 percent annually. Staff evaluated expenditure trends of individual
components of Operating Expenditures, as well as inflationary impacts on goods and services, to develop the projection.
It is slightly higher than the 4.2 percent annual growth trend over the last 15 years.
Capital expenditures are projected to grow at a base inflationary rate of 2.0 percent per year. Trends in capital
expenditures cannot be used to project future expenditures due to significant variation.
Transfers out of the General Fund are projected based upon specific parameters. Inflationary growth is applied to transfers
to Equipment Replacement, Computer Replacement, Compensated Absences, and the Chamber of Commerce contract.
Transfers to the TIF Funds are estimated based upon projections published in each TIF Project Plan. It is assumed that TIF
1 will expire in FY 2019, ending the transfer in FY 2020. This assumption may change based upon future Council direction.
TIFs 3, 4, and 5 are expected to also grow significantly over the next 15 years.
Putting all of these projections together, General Fund expenditures are expected to increase by nearly 77 percent to
$326.1 million in 2030 (Figure 37). During this period, the average annual growth for the entire General Fund is 3.6 percent,
compared to 3.3 percent from FY 2000 to FY 2014.
33
Figure 39: General Fund Expenditure Projection Through 2030
$350.0
$300.0
$250.0
$200.0
$150.0
$326.1
$304.2
$283.9
$265.0
$247.3
$221.5 $231.3
$205.1
$184.5
$173.0 $170.8
$166.9
$144.2
$135.9 $133.2
$119.5
$100.0
$50.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
$-
Actual Expenditures
Projected Expenditures
Staff’s projection includes funding for Medic 1 and Fire Station 12, but does not include funding for additional service level
enhancements or for non-bond CIP projects. As Irving continues to grow, the city will likely need to increase expenditures
further to maintain current service levels.
Expenditure and Revenue Comparison
Combining the revenue and expenditure projections shows the sustainability of the city’s current financial policies and
direction. Revenues are projected to outperform expenditures through FY 2027 (Figure 40), though the gap between the
two narrows each year. From FY 2019 to FY 2020, the growth in expenditures slows due to the assumption that the transfer
to TIF 1 will expire on December 31, 2018.
Figure 40: Comparison of Revenue and Expenditure Projections
$375.0
$325.0
$275.0
$225.0
$175.0
$326.1
$314.9
$304.2
$293.8
$284.2
$312.5
$277.6
$271.1
$298.0 $305.1
$264.8
$291.0
$252.7$258.7
$283.9
$246.9
$241.2
$274.3
$232.8
$265.0
$225.0
$256.0
$215.7
$247.3
$239.0
$200.0
$230.4$231.3
$221.5
$212.8
$205.1
$198.4
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Total Expenditures
Most Likely Revenues
Beginning in FY 2027, expenditures are projected to be above revenues through FY 2030. Should TIF 1 be extended, the
point at which expenditures outpace revenues will be earlier. This is projected to occur without any changes in service
levels or growth in city services to meet the needs of a growing population (with the exception of adding Medic 1 and Fire
Station 12). It also does not address funding issues the city is experiencing related to Economic Development,
infrastructure funding, and equipment replacement funding. The city cannot operate a budget where expenditures are
34
greater than revenues without depleting its reserves. Therefore, the city must begin to take steps over the next several
fiscal years to address both expenditure and revenue long term needs.
35
Reserve Analysis
Introduction
The City of Irving continually works to ensure that it puts safeguards in place to respond to the unpredictability of its
economic and operational environment. Chief among these safeguards are the maintenance of reserve funds (or fund
balances). Just like with a personal bank account balance, fund reserves are the monies that remain in a fund once all
revenues and all expenditures have been accounted for. If revenues are greater than expenditures, the reserves for that
fund grows. If expenditures are greater than revenues, the reserves will decrease.
The maintenance of adequate reserves serves many objectives, chief among them:
1. Provision of operating funds in the event of a catastrophe or acute budget shortfall
2. Reduction of the impact of economic variations from year to year
3. Assistance in demonstrating the City’s credit worthiness and financial security
While the first two objectives are major areas of concern for the city, staff and policy makers are more frequently involved
with the impact of reserve levels on the ability of the city to achieve a high credit rating for its GO bonds and revenue
bonds.
Like any asset, reserves must be adequately maintained and managed. A fund reserve amount that is too small indicates
a lack of preparedness for potential future difficulties, while an immense fund balance may unnecessarily restrict monies
that could otherwise be used for important and necessary projects. Because each city is unique in its operational and
financial condition, there are very few best practices that can apply to a broad collection of municipal organizations. Cities
will typically assess their own environment conditions, their bond rating objectives, and their comfort level with respect
to how many dollars they should set aside for contingencies before codifying a reserve policy.
As of September 30, 2014, the reserve policy for the City of Irving (provided in the appendix in full) states that:
“A minimum of 90 days of reserves is recommended for the City's Major Operating Funds (General, Water & Sewer
System, lAC, ICVB). This level of reserves is the minimum fund balance necessary in order to retain a AAA bond rating,
and is comparable to fund balance policies of other AAA cities. The 90 day reserve calculation will compare effective
fund balance to the current year's adopted budgeted expenditures divided by 360 days multiplied by 90 days.”
Current Reserves
The reserve analysis undertaken for Funding our Future 2030 was primarily restricted to General Fund reserves. As of
September 30, 2014 (the most recent audited year), the City of Irving maintained the following General Fund reserve
balances:
Figure 39: General Reserve Balances
General Fund
$32,852,347
Economic Development Fund
17,579,978
7 Recreation Center Funds
1,441,307
Texas Stadium Fund
207,238
Park Donation Fund
10,609
Comp Absences Fund
(21,397)
Other Funds
3
TOTAL
$52,070,085
36
Understanding that credit rating agencies, specifically Moody’s Investor Service and Standard & Poor’s, consider more
than just the General Fund reserves, the city also maintains reserves in its Non-Bond CIP, Technology Replacement and
Equipment Replacement Funds. The audited reserves of these funds, coupled with the General Fund reserves, are shown
below:
Figure 40: Total Reserves
Non-Bond CIP
$8,070,033
Computer Replacement
2,998,527
Equipment Replacement 10,122,287
SUBTOTAL
$21,190,847
General Fund Reserves
52,070,085
TOTAL
$73,260,932
In 2015, Moody’s presented their new Scorecard to the city. It changes the focus from measuring days of reserves against
operating expenditures to reserves as a percent of operating revenues within the general fund and debt service fund. In
2016, we will update our financial reserve policies to more align with the Moody’s Scorecard element.
37
Capital Analysis
Introduction to Capital Improvement Plan
Capital Improvement projects refer to the acquisition or construction of major capital facilities and infrastructure and may
include the construction of park facilities, the purchase of land, or the building of roads just to name a few.
The primary source of funding for the Capital Improvement Program (CIP) is the issuance of long term debt. While debt
will be discussed in the next section of this plan, it is important to make distinctions between Irving’s primary methods of
funding capital projects or acquiring capital assets.
Funding Method
General Obligation (GO) Bonds
Certificates of Obligation (COs)
Revenue Bonds
Non-Bond (Pay-Go) Funding
Description
A municipal bond backed by the full faith and credit (taxing
power) of the issuing jurisdiction rather than the revenue from
a given project. GO bonds must be authorized by voters
through a bond election.
A financing mechanism a city may use to pay a contractual
obligation for certain authorized activities. COs are not preauthorized by voters, but are backed by the full faith and credit
(taxing power) of the issuing jurisdiction.
Special obligations of the City (as opposed to general
obligations) that are payable solely from the revenues derived
from an income-producing facility. These are not taxsupported but may be supported by user fees.
A funding mechanism where projects are paid for by existing
(typically, one-time) funding.
It’s important to note that many projects use a combination of funding methods depending on the work to be performed.
For instance, a street reconstruction may use GO bonds for street portion, while revenue bonds may be used for any water
and wastewater pipe relocations that are necessitated by the project.
Current Spending
For Fiscal Year 2014-15, project funding has been budgeted from the following sources:
General Obligation Bonds
Water/Sewer System Revenue Bonds
Water/Sewer Non-Bond Pay-Go Funding
General Fund Non-Bond Pay-Go Funding
Drainage Utility Pay-Go Funding
Texas Musicians Museum Non-Bond Pay-Go Funding
TOTAL
38
$12,150,000
$12,000,000
$22,500,000
$4,648,104
$294,928
$1,000,000
$52,593,032
The project detail of the General Obligation Bonds can be viewed in the table below:
Street Lighting
Traffic Signal Installations
STREET IMPROVEMENTS
TxDOT Participation - SH 183 Expansion
TxDOT Right-of-Way Participation
PARKS SERVICES
Twin Wells Golf Course
SOLID WASTE SERVICES
Landfill Building
Fire Station 12
FIRE SERVICES
Burn Tower
POLICE SERVICES
Police and Fire Training Facility
CITY-WIDE COMMUNICATION
Communication Radio System
Total General Obligation Bonds
Total Capital Improvement Program
2014-2015
$
400,000
$
600,000
$ 1,000,000
$ 1,200,000
$ 1,750,000
$ 1,450,000
$ 2,000,000
$ 2,500,000
$
500,000
$
750,000
$ 12,150,000
$ 13,350,000
Capital Trends
Over the past 15 years capital projects have been funded through a number of different means (Figure 41), though
primarily through those mentioned above. The following graph illustrates the historical makeup of capital project funding
sources.
Figure 41: Capital Project Funding Sources (FY 2001 – FY 2015)
4%
4%
General Obligation Bonds
4%
9%
36%
Water and Sewer System Revenue Bonds
Hotel Tax Revenue Bond
Water and Sewer System Non-Bond CIP
Pay-Go
Brimer HOT Revenue Bonds
15%
General Fund Non-Bond CIP Pay-Go
Other
28%
39
Total Capital and other Project Funding FY 2001 – FY 2015
General Obligation Bonds
$ 294,340,000
General Fund Non-Bond CIP Pay-Go
34,189,483
Water and Sewer System Revenue Bonds
231,550,360
Water and Sewer System Non-Bond CIP Pay-Go
71,245,376
MDU Revenue Bonds
4,720,000
MDU Non-Bond CIP Pay-Go
6,319,105
Hotel Tax Revenue Bond (Convention Center)
124,385,456
Brimer Entertainment Venue Bond Issue 1,2 & 3
25,000,000
Brimer Entertainment Venue Bond Issue 4
35,048,923
Heritage Land Banking/Solid Waste Revenue Bonds
29,095,000
Certificates of Obligation
4,000,000
Tax Note
7,590,000
Lease/Purchase
3,010,000
Texas Musicians Museum
Interfund Loan
1,000,000
ED Fund
656,436
TOTAL $ 872,150,139
Most of the capital funding sources listed above are used quite sparingly. Funding from Certificates of Obligation, the
Heritage and Museum Fund, Entertainment Venue Bonds, Brimer HOT Revenue Bonds, and Hotel Tax Revenue Bonds have
each only been utilized in one fiscal year out of the past 15 fiscal years.
The most frequently utilized funding sources are:




General Obligation Bonds
General Fund Non-Bond CIP Pay-Go
Water and Sewer System Revenue Bonds
Water and Sewer System Non-Bond CIP Pay-Go
Over the past 15 years these sources, while utilized often, have demonstrated significant variability in the volume of
funding utilized (Figure 42). This variability can be attributed to many factors including the economy, the debt capacity of
the city, and the ability of the city to fund the ongoing operational costs of the investment. One will notice that beginning
in FY 2009, a reduction in the variability in capital spending is observed. Furthermore, during that time tax- backed
spending through General Obligation Bonds has consistently been held below $20M per year, while General Non-Bond
CIP Pay-Go has been utilized continuously (if not at peak levels). The cause for this reduction in variability and reduced
reliance on taxpayer backed debt for capital funding is largely due to the economic recession that began in late 2008. As
the recession caused property values to plummet, there was a commensurate reduction in the amount of revenue the
City’s property tax rate would yield. As a result, the reduction in revenue limited the amount of new GO debt the City
could sell. The increased use of General Non-Bond CIP Pay-Go funding is the result of efforts by the city to complete
limited capital projects through non-debt related means: use of budget savings, sales tax revenue increases, and spending
down of fund balance.
40
Figure 42: Historical Spending from Top 4 Capital Funding Sources
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$FY 00-01 FY 01-02 FY 02-03 FY 03-04 FY 04-05 FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15
General Obligation Bonds
Water and Sewer System Revenue Bonds
General Fund Non-Bond CIP Pay-Go
Water and Sewer System Non-Bond CIP Pay-Go
Forecast Analysis
In forecasting the capital needs of the City, the following assumptions were established:




Continued GO Bond expenditures at an average of $18M of new debt annually.
Continued population growth at (rate/buildout population)
Projected buildout at 2040
Inflation at the rates described in the economic section of this document.
The Capital Improvement Plan (CIP) is a rolling plan developed annually by the CIP Department. The planning process
initiates in February of each year for the succeeding fiscal year. During this process, departments articulate their project
needs, describe the work to be done, and estimate costs. Previously, departments only put forth their top project
priorities, however beginning in 2015, departments were asked to create a comprehensive list of the capital needs of their
entire operation. Once project needs are compiled, City staff prioritize projects on the basis of need, strategic impact,
and funding ability.
The current CIP is a 5-year plan (Figure 43) of project priorities and cost schedules. The 2015-2016 projects have been
funded primarily through General Obligation Bonds, with Certificates of Obligation in a supplementary role. Of the
projects reflected in the 5-year plan, the following will have additional ongoing operational costs that at this time are not
yet fully defined:









Campion Trails
Community/Neighborhood Park Development
Park Infrastructure Renovations
Thomas Jefferson Park Development
Apparatus Storage
Bay Add-Ons
Fire Station 12
Fire Station 4
In Car Police Video
41
Figure 43: 5-Year CIP Plan
PROPOSITION #1
Remaining
Authorization
2015-2016
2016-2017
2017-2018
2018-2019
2019-2020
TOTAL
$13,175,000
$5,100,000
$4,110,000
$10,650,000
$8,000,000
$41,035,000
$93,710,000
9,500,000
10,600,000
6,000,000
4,000,000
4,120,000
34,220,000
-
375,000
-
4,450,000
2,500,000
2,000,000
9,325,000
35,200,000
140,000
-
1,000,000
-
2,000,000
3,140,000
7,965,000
-
6,665,000
-
490,000
-
7,155,000
-
3,000,000
-
-
2,040,000
4,500,000
9,540,000
7,060,000
-
-
750,000
750,000
-
1,500,000
5,750,000
1,900,000
1,900,000
-
-
-
3,800,000
22,450,000
-
-
-
-
-
-
10,000,000
$28,090,000
$24,265,000
$16,310,000
$20,430,000
$20,620,000
$109,715,000
$182,135,000
STREET IMPROVEMENTS
PROPOSITION #2
STORM DRAINAGE
PROPOSITION #3
PARKS SERVICES
PROPOSITION #5
CITY BUILDINGS
PROPOSITION #6
SOLID WASTE
PROPOSITION #7
FIRE SERVICES
PROPOSITION #8
CITY-WIDE COMMUNICATION
PROPOSITION #10
GATEWAY INITIATIVES
PROPOSITION #11
RECREATION CENTER
Total General Obligation Bonds
Total Certificates of Obligation
$9,000,000
$9,000,000
Total Capital Improvement Program
$37,090,000
$24,265,000
$16,310,000
$20,430,000
$20,620,000
$118,715,000
Current Capacity - updated 6/2/15
$38,000,000
$20,250,000
$20,250,000
$20,250,000
$20,250,000
$119,000,000
Typically, use studies, amortization charts, and the Strategic Plan assist staff in prioritizing projects according to need and
strategic impact. Determining funding ability, however is primarily dependent on Council direction and the debt capacity
of the City (discussed in the next section). Generally, these steps are followed:
1. Capital projects are evaluated annually according to need and strategic impact. They are then reprioritized (if
needed) within the existing 5-year plan.
2. The City’s financial advisors determine what tax rate will be required to satisfy the new and existing debt
obligations of the city. This is the Interest and Sinking (I&S) rate.
3. The Maintenance and Operations (M&O) tax rate is determined by staff through the budget process. Both the
M&O and I&S rates combine for the overall city property tax rate.
4. If needed, projects are reprioritized within the 5-year plan to grant flexibility in either the M&O or I&S rates.
These actions greatly depend on Council direction with regard to tax rate and how early that direction can be
communicated to staff. Early and clear direction results in a streamlined and efficient CIP budgeting process.
Purchase Power of Authorized Funds
In developing our capital forecasts and analysis, an important question to ask is how can the city effectively manage its
debt authorization and other capital funding sources?
One factor we must look at is the lifespan of our current bond authorizations (Figure 44). The 1999 and 2006 bond
elections amount to over $575 million in voter approved authorizations. As of September 30, 2015, there are $291.85
million in voter authorized, but unsold bonds. This is due in part to the limited debt capacity that the tax rate can support.
42
Authorized
Sold
Remaining
Figure 44: Bond Authority
1999 Bond Election 2006 Bond Election
$249,785,000
$326,005,000
$191,210,000
$92,730,000
$58,575,000
$233,275,000
Total
$575,790,000
$283,940,000
$291,850,000
It is important to note that of the $291.85 million in unsold debt authority, the largest portion is the $134.745 million
designated for street projects (Figure 45). While there is a backlog of street projects, other service areas have little or no
remaining authorization. Library Services has no further authorization and nor will Police after the 2015 bond sale. Neither
will be able to fund capital projects with the 1999 and 2006 authorizations and must either rely on cash for funding or
wait until a future bond election.
Figure 45: Unsold Bond Authority by Proposition
Category
Balance (in millions)
Streets
$134.745
Parks
44.525
Drainage
34.220
Gateway
26.250
Public Safety (Police & Fire)
16.600
City Buildings
11.105
Senior Center
10.000
Communications
7.250
Solid Waste
7.155
Library
Public Safety (Police)
Analysis shows that at our current pace, it may be some time before the city exhausts it current authorization. Over the
past 15 years, the City sold an average of $18.4M in bonds per year. Looking forward, the City’s 5-year CIP plan calls for
an average issuance of $21.9M from 2016 to 2020. If we assume that revenues and capacity allow for 2 percent annual
growth from 2020 on, the current authorization will be effectively exhausted after the FY 2028 bond sale (Figure 46).
Figure 46: Bond Exhaustion Schedule
Bonds Sold Remaining Authority
FY 2015 12,150,000
291,850,000
FY 2016 28,090,000
263,760,000
FY 2017 24,265,000
239,495,000
FY 2018 16,310,000
223,185,000
FY 2019 20,430,000
202,755,000
FY 2020 20,620,000
182,135,000
FY 2021 22,000,000
160,135,000
FY 2022 22,440,000
137,695,000
FY 2023 22,888,800
114,806,200
FY 2024 23,346,576
91,459,624
FY 2025 23,813,508
67,646,116
FY 2026 24,289,778
43,356,339
FY 2027 24,775,573
18,580,766
FY 2028 18,580,766
0
43
An important factor to consider as bond authorization remains unused is the effect on the purchase power of these bonds.
As time goes on, inflation drives up the cost of projects. Thus, a $10M project in 1999 or 2006 costs significantly more in
2015, though the project scope remains the same.
Assume $10M could purchase 100% of a project in 1999. Today, that same $10M could only purchase 71% of that project
(according to Bureau of Labor Statistics data). So it goes, the more time that passes before using authorized debt, the less
capital infrastructure projects that debt can fund. Or to put it another way, inflation and rising costs of construction erode
the purchasing power of bonds.
Value of 1999 Authorization
$
In 1999
249,785,000 $
In 2015
177,291,350
Purchase Power Retained
70.97%
$
In 2006
326,005,000 $
In 2015
280,001,910
Purchase Power Retained
85.89%
Value of 2006 Authorization
Let’s continue to assume the projected bond sales as shown in Figure 46 through the foreseeable future. Adding in the
projected rate of inflation, we can illustrate the purchase power of future bond sales in 2015 dollars. Figure 47 asumes
2.3 percent inflation beginning in FY 2018.
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
FY 2024
FY 2025
FY 2026
FY 2027
FY 2028
Figure 47: Purchase Power of Future Bonds
Bonds Sold Remaining Authority Buying Power % of 2015 Value
12,150,000
291,850,000
12,150,000
100.0%
28,090,000
263,760,000
27,647,638
98.4%
24,265,000
239,495,000
23,277,097
95.9%
16,310,000
223,185,000
15,234,460
93.4%
20,430,000
202,755,000
18,653,736
91.3%
20,620,000
182,135,000
18,403,927
89.3%
22,000,000
160,135,000
19,194,150
87.2%
22,440,000
137,695,000
19,137,862
85.3%
22,888,800
114,806,200
19,081,739
83.4%
23,346,576
91,459,624
19,025,781
81.5%
23,813,508
67,646,116
18,969,987
79.7%
24,289,778
43,356,339
18,914,356
77.9%
24,775,573
18,580,766
18,858,889
76.1%
18,580,766
0
13,825,485
74.4%
To summarize, beginning in FY2015, the city had a combined $291.85 million in voter-authorized bond authority. By the
time all of the bonds are sold, the purchase power of the bonds sold will be a combined $267.35 million. This results in a
projected loss due to inflation of $24.5 million worth of projects over the remaining life of the bond authority.
44
Debt Analysis
Introduction to City Debt
The debt analysis reviews existing debt and evaluates potential debt instruments for funding municipal projects. The
ability to raise capital through debt is dependent on many factors including market conditions and credit rating.
The city issues different types of debt, as shown below:
Debt Type
General Debt
Certificates of
Obligation (COs)
Water and Sewer
Revenue Debt
Municipal Drainage
Utility (MDU) Debt
Hotel Occupancy
Tax (HOT) Debt
Entertainment
Venue Debt
Solid Waste System
(SWS) Revenue
Debt
Public Improvement
District (PID) Debt
Description
Backed by the “full faith and credit” of the City of Irving, and typically paid for
through property tax assessments.
A financing mechanism a city may use to pay a contractual obligation for
certain authorized activities. COs are not pre-authorized by voters, but are
secured by property taxes.
Issued to finance capital improvements and expansion of the city’s water and
sewer utility. This debt is financed through the revenue generated from water
system customers.
Similar to the water and sewer revenue debt, MDU debt is issued to fund the
maintenance of the city’s storm water drainage system and is funded by a
monthly fee on each parcel of land in the city.
HOT debt was issued to finance the land purchase, design, and construction of
the Irving Convention Center. The revenue source of this debt is 7% of the 9%
HOT tax, though property tax revenues back this debt in the event HOT tax
revenues are insufficient to meet debt payment obligations.
This debt was issued in 2011 to finance the cost of land acquisition and design
of a proposed entertainment venue next to the convention center. This debt
is funded by a 2% allocation of the City’s 9% HOT revenues.
Issued in 2012 to finance the city’s acquisition of land for redevelopment in
the Heritage Crossing District. This issue is considered part of the general debt
service, but has revenue from the SWS system specifically pledged as a
repayment funding source.
Issued in 2013 and 2014 to finance the development of public infrastructure
for three residential developments in Irving. While backed by the “full faith
and credit” of the city, the PID debt is self-supporting and will be paid through
incremental growth in the TIF districts and PID assessments on property
owners.
Credit Rating
AAA/Aaa
AAA/Aaa
AA/Aa1
AA+
AAA/Aaa
BBB+
AAA/Aaa
Credit Ratings
Before issuing debt, the city will seek a rating on the debt (bonds). The bond rating is a judgement of the credit-worthiness
of the city and its ability to repay the debt over time. Higher ratings equate to lower interest rates on the bonds. Credit
rating agencies will judge the financial conditions of the city on a set of pre-determined criteria. Different types of debt
(GO bonds, revenue bonds, etc.) will have different credit rating criteria.
Irving seeks bond ratings from Moody’s Investor Service and Standard & Poor’s. For simplicity and in keeping with prior
practice, the city will look to the Moody’s criteria in establishing financial practices that will secure the best possible rating
from both agencies.
45
In 2015, Moody’s Investor Service updated its general obligation rating criteria. These changes will to some degree affect
how the City of Irving conducts its financial planning and potentially impact established practices. The most notable
changes are listed in the chart below:
Notable Changes to Moody’s General Obligation Score Criteria
Impact of Economy/Tax Base factors reduced Lowered from 40% to reflect Moody’s observation that some local
(from 40% to 30% of total score)
governments have been either unwilling or unable to convert
economic strength into revenues. This is due to tax caps, anti-tax
sentiment, timing lags or other similar obstacles.
Impact of Debt/Pension factors increased
Factor weight increased to capture pension risks more fully.
(from 10% to 20% of total score)
Addition of a 5-year change in fund balance
Both of these criteria (each one 5% of the total score) were
and cash balance as a % of revenues.
incorporated to capture trend information and avoid overweighing
point-in-time data.
Current Debt Obligations
Figure 48 illustrates the total projected debt obligations of the City of Irving as of September 30, 2015. The current net
debt outstanding is listed and to it is added future anticipated debt that will be taken on through execution of the 2016
portion of our Capital Improvement Plan.
Figure 48: Principal Added and Retired (2012-2016)
Debt Type
General Debt
Funding Source
Property Taxes
Net Debt
Outstanding
9/30/2015
Proposed
Principal to
Principal to
be Added
be Retired
2016
2016
Net Debt
Outstanding
9/30/2016
$210,015,000
$28,090,000
($18,150,000)
$219,955,000
172,295,000
16,310,000
(14,320,000)
174,285,000
4,170,000
-
(195,000)
3,975,000
129,565,000
-
(790,000)
128,775,000
62,810,000
-
(240,000)
62,570,000
29,500,000
-
29,500,000
28,630,000
-
(1,140,000)
27,490,000
8,710,000
(Full Faith and Credit)
Water & Sewer
Water & Sewer
System Debt
System Revenue
MDU Debt
Convention Center
Debt
Drainage Utility Fee
2% HOT Revenue
5% HOT Revenue
General I &S Fund
Entertainment Venue
Debt
Convention Center
Hotel Debt
2% Brimer
HOT Revenue
Project Revenue
General I &S Fund
Sanitation C.O. Debt
General Fund
(Heritage Crossing)
O & M Revenues
PID #1 Debt
TIF Increment and
8,750,000
-
(40,000)
PID #2 Debt
PID Property
3,210,000
-
(40,000)
3,170,000
PID #3 Debt
Assessments
20,725,000
-
-
20,725,000
$640,170,000
$73,900,000
($34,915,000)
$679,155,000
Totals:
Debt Trends
To pay its general obligation debt service, the city allocates a portion of its tax rate toward debt repayment. This portion
of the tax rate is called the Interest and Sinking (I&S) rate. The I&S rate for FY 2016 is $0.1291 per $100 of valuation (out
46
of an overall tax rate of $0.5941 per $100 of valuation). This equates to 21.7% of the property tax rate being fully dedicated
to paying debt.
Over the previous 10 years, the city has, on average, dedicated 25.4% of its tax rate toward debt repayment (Figure 49).
Furthermore, the city has on average, been decreasing the I&S tax rate by an annual rate of $0.0014 (or 0.4%). While the
I&S rate has been reliably stable over the long term, the drop from FY 2015 to FY 2016 is significant (at 9.5%). Furthermore,
the FY 2016 I&S rate is 16.0% below the 5-year average.
Figure 49: Interest and Sinking Rate as a Percent of Property Tax Rate
35%
30%
25%
20%
15%
29.5%
26.1%
10%
23.3%
24.7%
24.7%
FY07
FY08
FY09
27.9%
26.2%
25.5%
25.6%
24.0%
21.7%
5%
0%
FY06
FY10
FY11
FY12
FY13
FY14
FY15
FY16
The capacity to take on new debt is largely a function of how much revenue is available to pay that debt. To determine
debt capacity, capital infrastructure expansion and replacement requirements are carefully balanced against current and
future revenue and expenditure patterns to determine the optimal level of debt issuance for any given year, as well as
determining total debt levels in future years.
The city’s financial advisor has estimated the future debt capacity of the city, expressed in terms of the I&S tax rate.
Projected to 2019, this estimate assumes all projects in the CIP up to 2019 are brought to fruition. It also assumes a
conservative 2% growth rate in taxable values over the term of the projection. Figure 50 illustrates the results of that
analysis.
47
Figure 50: I&S Tax Rate and Future Capacity
I&S Tax Rate Projections
0.2000
0.1800
0.1600
0.1400
0.1200
0.1000
0.0800
0.0600
0.0400
0.0200
0.0000
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39
The blue portions of the chart represent the I&S tax rate required to pay our annual debt service obligations for current
(as of 2015) and future (planned projects through 2019) debt.
One will notice that beginning in 2020, the I&S rate required to cover annual debt obligations becomes noticeably higher
than the previous years. The increase being shown for FY 2020-23 is the result of a debt restructuring which occurred in
FY 2011, where principal payments originally due in the FY 2011-22 time period were moved to FY 2020-23. The
restructuring was a reaction to the economic downturn. The restructuring also included using I&S taxes to support a
portion of the Convention Center debt.
It is anticipated a second restructuring could occur in FY 2019 which would result in a lowering of I&S requirements for
FY 2020-23. The I&S taxes used to support the Convention Center debt are expected to be reimbursed by Hotel
Occupancy Taxes (HOT) once the HOT exceed the amount necessary to pay debt service on the Convention Center
debt. In addition the expiration of TIF #1 will provide additional revenues that could be used to mitigate the increased
I&S rate.
Summary
Generally, it is difficult to project the debt capacity of the city far into the future due to the fact that infrastructure project
costs are largely unknown beyond a five year window and that capacity is primarily dependent upon the tax rate of any
given year. Tax rate policy decisions cannot necessarily be predicted into the future. However, as the city continues to
grow toward its 2040 buildout it will experience pressure to invest in more capital infrastructure—accelerating the
addition of new capital assets and hastening the maintenance needs of others. Further reduction in the I&S rate below
the 10-year average will severely limit the city’s ability to meet these needs. Additionally, increases in the tax rate for the
specific purpose of increasing debt capacity for investment in infrastructure will better enable the city to keep pace with
the projected growth trends.
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Findings, Conclusions, & Recommendations
General Findings and Conclusions
Demographic and Economic Outlook
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Irving demographics will undergo significant change, notably:
o The addition of more than 53,000 residents over the next 25 years (290,120 people in 2040) will have a
significant impact on the city’s budget, both adding revenue and increasing service demands
o While Irving age demographics have remained mostly consistent, the city has seen a decrease in
populations of ages 20-24 (2.0%) and 25-34 (8.0%) and data indicates that trend will continue
The economy is growing, but the reliability of this growth is uncertain:
o The national economy growth is slowing and expected to continue that trend
o The state economy growth is expected to slow
o State sales tax receipts are showing slowed growth
o The business cycle points to an economic recession in the next few years
Irving’s economy, while strong, faces challenges:
o Unemployment rates in the city have fallen
o Steady growth in wages and personal income is projected
o The median household income of Irving ($51,722) is lower than that of the Metroplex ($57,398)
o Poverty indicators have increased since 2000
The city will reach full buildout in 2040. In the intervening time, an estimated 2,000 acres of land will be developed
for mixed-use purposes, 1,500 for housing, and 500 for business.
While Irving is expecting slow and steady growth, on average, through 2030, the future will include periods of
growth and contraction at unknown intervals
Revenues Outlook
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Due to the high percentage of commercial taxable value (70%), Irving’s tax base is more heavily affected by
changes in the economy when compared to other cities. Additionally, aspects of state tax law create a system
where commercial properties may consistently reduce their tax burden significantly below the appraised value,
shifting the tax burden to other taxpayers.
While sales tax revenues are currently robust, there is strong consensus that Irving can expect volatility in sales
tax returns. Overall, sales taxes will grow at a healthy annual average through 2030, however the city should
expect negative growth in sales taxes to be realized somewhere during that period.
Total General Fund Revenues will, on average, increase steadily in the next 15 years, with 2030 revenues projected
at $312.5 million. This assumes the expiration of TIF #1 at the end of 2018. Should TIF#1 be extended, revenues
available to the general fund during the planning period will be significantly reduced.
Expenditures Outlook
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

As the city’s population continues to grow, increases in authorized personnel will be required to maintain services
levels and ensure adequate public safety. Personnel is the main driver of expenditures with 70% of the operating
budget dedicated to personnel costs.
Health insurance cost increases are influenced by the Affordable Care Act and final regulations are not yet
available. The city has made and intends to make plan modifications to hold costs down, however changes in
health care legislation and industry-wide cost trends present an unknown for the city.
With no significant service changes, General Fund expenditures are projected to increase by nearly 77 percent to
$326.1 million.
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General Fund expenditures will surpass revenues beginning in 2027. This is expected to occur without any changes
in service levels or growth in city services to meet the needs of a growing population. Future policy decisions
related to TIF 1 may further change this projection.
Capital Outlook
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As of the end of FY 2015, there are $291.85 million of voter authorized, but unsold bonds, available for
infrastructure projects within the city. Of this number, $134.745 million are dedicated for street projects – an
area of strategic need for the city.
Due to current debt capacity, bonds from the 1999 and 2006 bond elections will not be exhausted until beyond
2028.
The delay in selling bonds for infrastructure projects, ensures that the purchasing power of bonds will be reduced
by more than 25 percent during that time. This limits the number of projects that the bond proceeds can purchase.
Debt Outlook
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The I&S rate is projected to remain stable through FY 2019 then see a significant increase for the FY 2020
through FY 2023 period, unless sufficient restructuring occurs prior to that time. The impact of that increase can
be mitigated not only by restructuring existing debt but also through the use of revenues freed by the expiration
of TIF #1. If market conditions do not allow the debt restructuring or if TIF #1 revenues are not available, the
city will be faced with managing an increase equivalent to 3 to 4 cents of the tax rate.
As the city continues to grow toward buildout, it will experience pressure to invest in more capital infrastructure
– whether in new capital assets or maintenance of existing assets. Reduction of the I&S tax rate below its 10 year
average will severely limit the city’s ability to meet these needs.
In conclusion, Irving’s current favorable economic conditions should outperform the state and nation over the next 15
years. This positive performance will not be steady as, at times, periods of recession and volatility are expected to
negatively affect most revenue sources. Furthermore, growth in population will increase the infrastructure and
operational service demands on the city. At some point during the next 15 years, regardless of any future service
enhancements, expenditures will begin to outpace revenues (we have conservatively projected this date at 2027). Policy
makers should consider implementing practices that will ensure staff are equipped with the necessary resources to
respond to the future demographic growth and economic uncertainty. The following section outlines staff
recommendations toward that end.
Key Challenges
Based upon the financial analyses performed, City Council and staff have identified several key challenges facing the long
term financial resiliency and stability of the city. These critical challenges are as follows.
Outstanding Debt
City Council expressed that the city’s level of outstanding debt is a key challenge. The city has a total of $640,170,000 in
outstanding debt (principal) as of September 30, 2015. This total is across all funds (General, Water and Sewer, Municipal
Drainage, Convention Center, Entertainment Venue, Solid Waste Services, and TIF/PID). Debt is an important tool used by
the city to fund long term, large-scale capital investments. It is critical to the city’s financial resiliency and sustainability to
both use debt and maintain an appropriate level of debt.
Vehicle and Equipment Replacement Funding
The city is not adequately funding the replacement of its fleet vehicles and capital equipment. The city operates a Vehicle
and Equipment Fund to replace vehicles in the city fleet and other large capital equipment. The fund is a budgeting tool
designed to spread the costs of large capital purchases over the time period the units are being used with the expectation
that the sum of the funds collected will be sufficient to replace the equipment when it is worn out.
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Over the last 9 years, the VERF has depleted its available fund balance by $15 million (from $22.5 million to $7.5 million
projected at the end of FY 2015), or 67 percent. Focusing on the last 5 years, the city has contributed an average of $2.75
million per year to the VERF from all funds, while spending an average of $3.6 million per year purchasing equipment.
Additionally, the city has been postponing the replacement of vehicles and equipment since 2010 due to a lack of available
funding.
The city has “pent-up demand” to replace equipment and on-going need to replace worn out equipment, but has not
adequately funded this replacement.
Health Insurance Compliance and Total Compensation
Federal health care legislation and the rising cost of health care across the country pose a challenge to the city to contain
the growth of personnel costs, the largest component of the budget. The General Fund has averaged 7.3 percent annual
increases in health insurance costs over the last 15 years. The Affordable Care Act (ACA) is introducing several regulations
that may change the future landscape of health care spending. The “Cadillac Tax” provision of the ACA poses a significant
threat to the city, as it penalizes health insurance plans that are deemed too generous. Changes to health coverage also
impact the total compensation package the city offers to employees.
The city is challenged to offer a total compensation package that complies with ACA regulations, recruits and retains a
high quality workforce, and contains long term costs related to the largest component of the city’s expenditures.
Infrastructure Funding
The city’s current funding for infrastructure is inadequate to meet the repair and replacement needs of the city’s critical
infrastructure. Residents and businesses have consistently rated the condition of streets as the highest priority for the
city. At the current rate of funding, the city will replace all streets in the city once every 200 years. The city currently has
$134,745,000 in bond authority remaining from the 2006 bond election to repair and replace streets, but, based upon
projected debt capacity, the city will not exhaust this authority until approximately FY 2029. Funding for the improvement
of streets is a key challenge for the city over the next 15 years.
Economic Development Funding
Irving does not currently have a dedicated source of Economic Development funding. There is extraordinary competition
within the region for business capital investment and relocations. Some cities in the Metroplex that Irving competes with
utilize a 1 percent sales tax, but the city is unable to use this source due to its membership in DART. Other cities have a
dedicated property tax rate for Economic Development. The city has invested heavily in Economic Development through
the General Fund and other means. As available funds become more scarce, however, funding Economic Development
investments, such as incentives and infrastructure, may become a greater challenge.
AAA Bond Rating
The city is rated Aaa/AAA for bonds by Moody’s and Standard and Poor’s and desires to maintain that rating. With only 6
Texas municipalities rated Aaa by Moody’s, the city must manage sound fiscal health and financial practices to maintain
this rating.
Maintaining Low Taxes and Charges for Service
The City of Irving prides itself on maintaining a low property tax rate and low charges for services compared to other
similarly sized cities in DFW. With the funding needs the city is currently experiencing, it is a challenge to provide superior
levels of service, ensure financial resiliency and sustainability, and maintain tax rates and charges for service among the
lowest in the region.
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Recommendations
The purpose of Funding Our Future is to both identify and address the key challenges facing the city. Below are staff’s
recommendations to begin to address the challenges listed above. Many of the challenges cannot be addressed in a single
budget year. Therefore, staff has provided recommendations to implement in FY 2016 and, in some instances,
recommendations that may be implemented in future years. Staff will work collaboratively with City Council to identify
solutions to the city’s financial challenges to ensure that Irving remains a financially resilient and sustainable community.
General Fund Reserves
Recommendation 1:
Amend financial practices to maintain a General Fund balance target at 28%-33% of revenues.
Background
In April of 2015, Moody’s Investor Service shared its new
scorecard for GO bond ratings. The new scorecard states
that an “Aaa” city will typically maintain a fund balance
reserve level that is greater than 30% of its operating
revenues. The FY 2015 end of year reserve balance for the
General Fund is anticipated to be $61 million. This equates
to 27 percent of operating revenues.
Impact
By setting a target that falls within a range around the
Moody’s reserve criteria, the city will ensure flexibility in
meeting this goal.
Recommendation 2:
Implement a budgetary practice that builds toward the budgeting of the full costs of personnel without the
recognition of “vacancy savings”
Background
General budgetary practices allow for the inclusion of
vacancy savings to offset expenditures. Vacancy savings
are an assumption that a certain percentage of salary and
benefit dollars will not be spent due to natural turnover.
As an example, no salary and benefits will be paid for a
position from the time it becomes vacant to the time the
new hire begins work. In the 2014 budget, Irving
conservatively estimated vacancy savings at 2% of total
salary and benefits expenditures. This allowed the city to
reduce the amount of budgeted salary and benefits
expenditures by 2%.
Impact
Budgeting at the full cost of personnel (no vacancy savings)
will have three primary impacts:
1. It will simplify the personnel budgeting process.
2. It will allow for actual vacancy savings to contribute to
the general fund reserves or, if reserves are on target,
contribute to one-time costs or projects.
3. It will have a positive impact with respect to the new
Moody’s scorecard as actual unspent vacancy savings
will increase the ratio of fund balance to revenues.
This last point is significant as no less than 5 Moody’s bond
rating criteria are positively affected by maintaining fund
and cash balances. Collectively, these 5 criteria account
for 40% of the overall bond rating.
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Water/Sewer Fund Debt Coverage
Recommendation 3:
Amend financial practices to maintain a Water/Sewer Fund debt coverage ratio of 1.7x-2.0x the annual debt service
and adopt water/sewer rates that are sufficient to achieve this ratio target.
Background
In April of 2015, Moody’s Investor Service shared its new
criteria for Water/Sewer revenue bond coverage ratio
calculations. The new criteria is net revenues/annual debt
service, which measures the city’s capacity to pay annual
debt service from the net revenues of the system. In this
new criteria, calculations based on annual debt service are
given 15%, or three times as much weight as previous
calculations based on the average annual and maximum
annual coverage calculations combined. In its 2015
affirmation of the city’s”Aa1” rating, Moody’s assessed the
2015 water/sewer debt service coverage as moderate
compared to the system’s peers in the same rating
category. Moody’s stated it expected the implementation
of future rate increases that would result in improved debt
service coverage consistent with the current rating
category.
Impact
To help maintain the current “Aa1” water/sewer revenue
bond rating, the city should set a target of 1.7x to 2.0x
coverage.
Current debt service requirements are
structured so the annual and maximum debt service
coverage ratios are relatively the same for the next 7-10
years. This ensures that the new scorecard calculations
will have no effect on current bond covenants. Going
forward, water/sewer rates should be set at a level that
improves the Annual Debt Service Coverage ratio to where
it is considered strong by the rating agencies.
Vehicle and Equipment Replacement Fund (VERF)
Recommendation 4:
Make the following changes to practices related to the VERF:
a) Account for general operations vehicle and equipment replacement within the General Fund, and account for
Water Utilities and Solid Waste Services vehicle and equipment replacement within their respective
enterprise funds;
b) Develop criteria defining which vehicles and equipment should be included in the VERF;
c) Provide annual funding that allows vehicles to be replaced at the end of their useful lives
4a) Background
Currently, all vehicle and heavy equipment replacements
are funded through the vehicle and equipment
replacement fund (VERF) – a fund unto itself. The General
and enterprise funds contribute to the VERF and the VERF
reserve balance is maintained separately outside of these
other funds.
4a) Impact
Under a true VERF, each cost center would be responsible
for the lease fees on their units. It would be easier to
maintain this discipline if the funds that participate in the
VERF account for their activity within their respective
funds. It would especially be beneficial to Water Utilities
in that it would allow the funds set aside for future use to
be counted as their “cash on hand” and the “annual debt
service coverage” calculations for Moody’s scorecard
reporting. Additionally, by bringing general operations
vehicle and equipment replacement into the General
Fund, Moody’s will count the assigned and unassigned
fund balance toward the General Fund reserves.
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4b) Background
In studying the VERF, it became apparent that not all
equipment were not included in the VERF but, due to
replacement value considerations, should be. An example
are the mowing units maintained by the Parks and
Recreation Department. Many of these mowing units
have replacement values greater than $10,000 with some
replacement values reaching between $45,000 and
$90,000.
4b) Impact
Examining and redefining the VERF criteria would allow
vehicles and equipment to be accounted for correctly. It
is difficult to determine the total current replacement
value of the vehicles and equipment that should be
covered by the VERF when there is not clear definition of
what is included in the Fund.
4c) Background
The current replacement value of and replacement
schedule of the VERF units should be updated and annual
lease fees charged to departments based on the updated
amounts. Without this level of VERF funding, the city will
continue to draw down on the VERF reserve balance
and/or further delay the replacement of vehicles or
equipment. The city has already delayed replacing certain
key vehicles year after year and is to the point where
replacement of these vehicles cannot be further delayed.
This existing backlog of replacements has created a pentup demand that would require additional funding over the
upcoming 3 fiscal years to “catch up”.
4c) Impact
Early estimates show that operating the VERF in the
traditionally prescribed manner would require a $10.8M
contribution in fiscal years 2017, 2018, and 2019.
Economic Development Funding
Recommendation 5:
Secure sustainable and long-term economic development funding through an annual dedication of revenues that are
used to encourage development and redevelopment of property.
Background
The North Texas region is one of high competition for
economic development opportunities. Many of Irving’s
competitors have dedicated funding sources for their
economic development activities. These funding sources
are often through the dedication of a portion of sales or
property tax revenues. Currently, Irving does not have a
dedicated and sustainable source of funding for its
economic development activities.
Impact
Creating a dedicated funding source for economic
development initiatives within the City of Irving will
provide a more even playing field when competing within
the region for jobs, private capital investment, and
infrastructure enhancements that attract businesses.
Ultimately this will lead to a more diverse and vibrant local
economy. To achieve this goal, the City may consider
utilizing revenues available after the expiration of TIF #1
for this purpose.
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Recommendation 6:
Any funds budgeted for economic development incentives, but not spent, will be rolled into the Economic
Development Fund.
Background
The City annually budgets funds for new or existing
economic development incentive agreements within the
Economic Development budget of the General Fund. For
various reasons, most notably when the terms of the
incentive agreement are not met by the business, the city
may find that is will not completely spend its incentive
budget. Under current circumstances, these unspent
funds will roll into the fund balance reserves of the
General Fund at the end of the fiscal year.
Impact
By rolling incentive savings into the Economic
Development Fund, monies earmarked for an economic
development purpose can serve that purpose through
one-time economic development projects. Additionally,
this arrangement provides a consistent source of growth
for the Economic Development Fund without affecting the
budget of other services and operations.
Infrastructure Funding
Recommendation 7:
Implement a property tax rate increase solely dedicated (by adopted budget policy )to increase bonding capacity and
available funding for street repairs and construction. This property tax increment increase would sunset when the
1999 and 2006 street bond authorization has been exhausted.
Background
The City currently has $291.8 million of authorized but
unsold bonds for infrastructure projects. The number of
bonds sold annually is dependent on the capacity of tax
revenues to support the debt. At our current capacity, the
1999 and 2006 bond authorizations will not be completely
exhausted until the year 2028. During that time, the city
can expect the purchasing power of those authorized
bonds to be reduced by as much as 25%. Additionally,
there are $134.7 million in remaining street bond projects
that have yet to begin due to limited capacity.
Impact
By creating a dedicated tax for streets, the City will be able
to gain ground on outstanding street projects by
increasing its street-related debt capacity. Streets and
street maintenance are consistently the worst rated
service in the resident survey. Street quality also
significantly affects business performance and the visitor
experience.
Compensation
Recommendation 8:
Explore sustainable practices that continue to ensure competitive pay and benefits for all employees
Background
Goal 6 of the City Council Strategic Plan directs staff to
maintain a “talented and energized workforce”.
Objectives within this goal include the recruitment,
retaining, and development of a diverse workforce –
including competitive compensation and benefits. In
recent years, practices such as COLA increases have been
inconsistently applied due to the variability of the
economy. Additionally, structural costs such as health
insurance have proven a challenge in ensuing employees
maintain a competitive “take home” pay rate. Finally, pay
adjustments, have not been consistently applied across all
employee categories.
Impact
The exploration and study of sustainable practices can
ensure a competitive and fair rate of pay for all employees
for the long-term. The investment of time and limited
resources in the areas of pay plans, pay adjustments,
health and retirement benefits, and other postemployment benefits (OPEB) will ensure that pay practices
can be consistently and reliably applied and maintained.
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Other
Recommendation 9:
End of fiscal year General Fund surplus (revenues over expenditures), as confirmed and finalized by the annual audit,
should be applied in the following prioritized manner:
1.
2.
3.
4.
Maintaining an unreserved fund balance amount of 28%-33% of revenues;
Contribution to the Vehicle and Equipment Replacement Fund to offset any underfunding;
Non-Bond CIP; and
Economic Development
Background
In times of economic growth, revenues may increase over
budgeted amounts. Such excess revenues may be
diverted to areas that Funding Our Future 2030 has
identified as a key financial challenge.
Impact
Diversion of excess revenues that are above budget, will
aid the city in ensuring that unanticipated revenue
increases in are utilized to fund critical needs. With this
recommendation, management will have the flexibility to
determine how these needs are prioritized.
Recommendation 10:
Minimize the spike in I&S debt service requirements in FY 2020 through FY 2023 by:
1. Refinancing the Convention Center Debt once callable in 2019;
2. Front-loading of principal in new GO issues prior to 2020; and
3. Considering the benefits of refinancing of existing GO debt
Background
When the City’s General Obligation debt was refinanced in
2011 in order to assist with the Convention Center debt, it
was anticipated that the Convention Center debt would be
refinanced at the first call date in 2019. Until that occurs,
any savings from refundings should be applied towards the
peak GO debt service requirement years of FY 2020 to FY
2023 and new issues should be structured around this
peak.
Impact
Through the use of these three tools, the I&S fund debt
service requirement spike during FY 2020 to FY 2030 can
be minimized.
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Future Considerations and Planning
Future Topics to Address
In engaging in this planning effort, staff understood from the beginning that not all aspects of the city’s finances could
be reviewed within the planning timeframe. In particular, staff was unable to give a full analysis of several important
financial topics including:
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Other Post-Employment Benefits (OPEB)
Pension sustainability
Technology Replacement Fund
Heath Care Funding
It is the intention of the planning team to review these topics more thoroughly in next planned update to Funding Our
Future 2030.
Future Planning
The 2015 planning process that resulted in Funding Our Future 2030 is envisioned as the first step in an ongoing planning
cycle. This plan will be updated on a recurring basis, likely every 1-3 years as the financial environment and financial
conditions of the warrant review.
It is staff’s recommendation to complete the next review no later than Fiscal Year 2017. The FY 2017 update of the longterm financial plan will not only give thorough review to the topics listed above, but also take advantage of the wealth of
land use, economic development, and other planning data generated by the then-completed Comprehensive Plan
Update.
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