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HomeMy WebLinkAboutCity of Southlake - Public Financial Report Popular Annual Financial Report Fiscal Year Ending September 30, 2021 Inside this issue: Brief History of Southlake 3 Council / Manager Form of Government 4 Achievements & Awards 5 Summary of Independent Auditor's Report 6 Government / Business Type Activities 7 Government Wide Highlights 8 Statement of Net Position 9 General Fund Highlights 10 Long-Term Financial Capital Planning 11 Dear Residents, The City of Southlake is pleased to present the City of Southlake Popular Annual Financial Report (PAFR) for the fiscal year ending September 30. 2021. Throughout the year, the Finance Department focuses on budgets, audits, financial policies, financial forecasts, and financial management with the mission: “to facilitate accountability of the city’s funds and other assets entrusted to the city and provide financial information to enable decision-making that will ensure the city’s financial sustainability while providing exemplary service to our Internal and external customers.” The financial information in this report is derived from the independently audited financial statements that are a part of the City’s 2021 Comprehensive Annual Financial Report (AFR) which is prepared in accordance with Generally Accepted Accounting Principles (GAAP) and is audited by an independent Certified Public Accounting firm, Weaver LLP of Dallas. The AFR also contains more detailed and extensive information, such as the audited financial statements, notes, schedules and other relevant information. While we understand, analyzing financial statements can be challenging, especially for those who do not do so on a regular basis, it is our hope that you find the PAFR to be informative and understandable. This report is intended to present a condensed overview of the City’s financial position, financial practices as well as outline how City revenues were generated and how it was spent during the 2021 fiscal year. The PAFR also represents the ongoing commitment of City of Southlake to keep our citizens informed about City finances and to be accountable for the receipt and use of public funds. As you review the PAFR, please share any questions, concerns or recommendations that you may have with us. We invite you to share your thoughts and opinions with us as we value your input and look forward to addressing any comments you may have. If you have questions concerning the financial reports or would like additional information, you may send an email to sjackson@ci.southlake.tx.us or call the Finance Department at 817-748-8345. The AFR is also available online at http://www.cityofsouthlake.com. Sincerely, Sharen Jackson Chief Financial Officer 1400 Main Street, Suite 430 Southlake Texas 7609 Sharen Jackson MESSAGE FROM THE CHIEF FINANCIAL OFFICER The Southlake area was settled by pioneers in the 1840s and eventually grew to include the settlements of Whites Chapel, Dove, Union Church and Jellico. Worried that the City of Hurst might annex the area, residents voted 30-24 on September 25, 1956 to incorporate. The original Town of Southlake contained 1.62 square miles, had a population of just over 100 and was located between FM 1709 and SH 114 (both two-lane roads) near the inter-section of Carroll Avenue. The name “Southlake” was chosen from names suggested by its residents and was formally incorporated four years after Lake Grapevine was completed. By 1966 the population of the City had grown to approximately 1,250 and by 1970 had risen to just over 2,000 residents. The area remained rural until the completion of the DFW International Airport in the 1970s, when people began moving from the urban sprawl to the rural atmosphere of Southlake. This migration caused a phenomenal growth in population from 2,808 in 1980 to 7,065 in 1990. The History of Southlake Basic Facts Development of Master Planned neighborhoods By the 1990s, six (6) manufacturers in the community produced engines, concrete products, and food packaging. The City also began to develop master planned neighborhoods with minimum lot sizes of one acre, but eventually reduced this requirement to 1/2 and 1/3 acre tracts. By the 2000s, Southlake had become a boom-burb with the population tripling to almost 22,000 and was well known for its picturesque countryside, exemplary school district and luxury neighborhoods. Today, the City’s population stands at just over 30,010 and is estimated to reach 34,000 residents by the year 2050. “Texas Highway 114 was completed in 1932 and was instrumental in providing a catalyst of growth that eventually would be called the City of Southlake.”  FY2021  The City of Southlake Popular Annual Financial Report Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork Page 3 Average Home Sales Price Texas: 345,900 Southlake: $962,285 Median Household Income: Texas: $87,260 Southlake: $230,700 Top Ten Employers: SABRE Holdings - 2,550 TD Ameritrade - 1,978 Carroll ISD - 1,1454 Keller Williams - 650 Gateway Church - 613 Verizon Wireless - 670 City of Southlake - 539 Central Market - 395 Hilton Southlake - 230 Methodist Southlake Hospital - 200 Total Businesses & Non-Profits: 2,601 General Fund Expenditures: $71,200,673 City Bond Rating: “AAA” From Standard & Poor’s “AAA” From Fitch IBCA NOTE: A Triple-A (AAA) bond rating is the highest rating bond agencies award to an investment considered to have a low risk of default, thereby making it the most creditworthy. The importance of this rating is it alerts investors to the quality and stability of the bond. That is, the rating greatly influences interest rates, investment appetite, and bond pricing. Furthermore, the independent rating agencies issue ratings based on future expectations and outlook Year Incorporated: 1956 Size: 22 Square Miles Population: 31,199 Total Sales Tax Rate: 8.25% - (Includes 0.5% for Parks and 1.25% for Crime Control District and 0.375% for Community Enhancement and Development Corporation) City Property Tax Rate: $0.447 per $100 valuation On April 4, 1987, Southlake voters approved a home rule charter, which established a council /manager form of government. This form of government combines the strong political leadership of elected officials and the strong professional experience of a City Manager. The Mayor and City Council establish policy and law. The City Manager is responsible for submitting the annual budget, directing day-to-day operations, advising the City Council on matters affecting the city and appointing and removing city personnel. Council / Manager Form of Government Shana Yelverton City Manager The City of Southlake Popular Annual Financial Report Page 4 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork City Manager's responsibilities: • Facilitate good governance and provide strategic leadership to the municipal organization. • Ensure a strong and sustainable financial condition for the city. • Promote citizen involvement and governmental transparency. • Develop a high-performance organization. • Creates an employee value proposition that supports the city’s mission and strategic goals. City Council Responsibilities • Councilors help constituents by connecting them to resources, services and City departments. • City Council also administers the City's goals, major projects and infrastructure improvements ranging from community growth and land use to finances and strategic planning. They serve as advocates for all Southlake residents. • Through their work, the City Council makes sure Southlake continues to be a great place to live, work and play. Mayor John Huffman Responsibilities • Preside at its meetings and vote; Serve as head of government for ceremonial purposes; Perform no administrative duties; Serve as spokesperson for the city; and Facilitates communication. John Huffman, Mayor Randy Robbins Chad Patton Amy Torres-Lepp Ronell Smith Kathy Talley Randy Williamson The Certificate of Achievement for Excellence in Financial Reporting and Distinguished Budget Presentation Award are prestigious national awards bestowed by the Government Finance Officers Association (GFOA) recognizing an entity for its conformance with the highest standards for preparation of state and local government financial reports. The awards also honor the transparency and detail in the City’s financial reporting efforts to its constituency and the general public as a whole. In order to be awarded a Certificate of Achievement, a City must publish an easily readable and efficiently organized Comprehensive Annual Financial Report (AFR). The AFR is an audited document and is prepared in conformance with generally accepted accounting principles (GAAP) which includes a full disclosure of all material financial and non-financial events. And while more than 30,000 government entities are eligible for these awards, typically less than 10% earn them. In 2021, the City received its 21th consecutive Certificate of Achievement for Excellence in Financial Reporting. For more in-depth financial information, you can find a copy of the AFR on line at: www.cityofsouthlake.com. Certificate of Achievement For Excellence In Financial Reporting During this same year, the City received its seventh consecutive Achievement of excellence in Procurement Award for 2021 from the National Purchasing Institute. Established in 1995, this award recognizes organizational excellence in procurement by measuring innovation, professionalism, e-procurement, productivity and leadership attributes of the procurement function. AEP awardees obtain a high score on a rating of standardized criteria. Achievement of Excellence in Procurement Award The GFOA established the Distinguished Budget Presentation Awards Program (Budget Awards Program) in 1984 to encourage and assist state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA ’s best practices on budgeting and then to recognize individual governments that succeed in achieving that goal. In 2021, the City of Southlake received its fifteenth consecutive Distinguished Budget Presentation Award. Distinguished Budget Presentation Award The City of Southlake Popular Annual Financial Report Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork Page 5 Award for Outstanding Achievement n Popular Annual Financial Reporting The Government Finance Officers Association Of The United States and Canada (GFOA), established the Popular Annual Financial Reporting Awards Program in 1991 to encourage and assist state and local governments to extract information from their comprehensive annual financial report to produce high quality popular annual financial reports specifically designed to be readily accessible and easily understandable to the general public and other interested parties without a background in public finance and then to recognize individual governments that are successful in achieving that goal. The GFOA has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to City of Southlake for its Popular Annual Financial Report for the fiscal year ended September 30, 2021. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability, and reader appeal. An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. The City of Southlake has received a Popular Award for the period ending on September 30, 2021, and we believe our current report continues to conform to the Popular Annual Financial Reporting requirements, and we are submitting it to GFOA to determine its eligibility for another Award. On March 11, 2022 an independent audit report was completed by Certified Public Accountants WEAVER, LLP of Dallas, Texas. The audit was conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. These standards require that auditors plan and perform the audit to obtain reasonable assurance about whether the basic financial statements of the City are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation of the City of Southlake, Texas as of and for the fiscal year ending September 30, 2021. For the purposes of this report, a summary of the audit has been listed under the “Financial Highlights” Section of this document and a full copy of the report can be found in the City’s Comprehensive Annual Financial Report at www.cityofsouthlake.com. Independent Auditor’s Report Summary Condensed Financial Statement the Finance Department, 1400 Main Street, Suite 430, Southlake Texas 76092 or visit us at: www.cityofsouthlake.com. The consolidated Financial Statements are presented in conformity with Generally Accepted Accounting Principles (GAAP). For a copy of the full 2021 Comprehensive Annual Financial Report (AFR) containing audited Fi- nancial statements, which also includes more detailed infor- mation, please contact “Southlake’s occupancy growth rate has reached 4,562,426 square feet of retail space and 4,688,353 square feet of office space in fiscal year 2021” The City has strong financial management principles that provide the framework for the City’s financial sustainability. They include: • Tax rate management: The tax rate is allocated properly between maintenance/operations and debt service. • Structural balance: The City’s ability to weather potential economic downturns or other financial challenges is critical. The City does not use reserves to balance the operating budget. • Reserve management: The City’s fund balance policy requires a minimum 15% and optimum 25% balance. The City uses “excess” reserves as a means to fund one-time, “pay-as-you-go” projects. • Multi-year financial plan: The long-term effect of today’s decisions on tomorrow’s financial situation is an important consideration during the budget process. • Quality service delivery: The City is committed to meeting the needs of our community through high quality service delivery. • Risk management: The City supports ongoing initiatives to safeguard the public trust by internal audits and other initiatives to maintain a strong control environment. Page 6 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork The City of Southlake Popular Annual Financial Report The City of Southlake fiscal year begins on October 1st and ends on September 30th of any given year. As of September 30, 2021, the position of the City (which includes the total resources of the City such as cash, securities, inventory, machinery and real property) exceeded its liabilities (otherwise known as debt, money owed or pecuniary obligations) by $692,665,685. Of this amount, $143,009,198 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors. The City’s total net position increased by $37,831,508. This increase can be attributed to increases in sales tax revenue, contributions and charges for services. At September 30, 2021 the City’s governmental funds reported combined ending fund balances of $136,589,707. Approximately 11.6 percent of this amount, $15,810,846 is available for spending at the government’s discretion (unassigned fund balance). More detail can be found in the City’s AFR online at www.cityofsouthlake.com. FY 2021 Ad Valorem Tax Rate • The FY2021 adopted budget reduced the City’s property tax rate from $0.41 to $0.405 per $100 valuation,. • For fiscal year 2021, a 20% homestead exemption is included to complement the current over 65 exemption of $75,000, disabled exemption of $75,000 and the over-65 tax freeze. • Of the current budget tax rate of $0.39 per $100 valuation, $0.33 is proposed for general operations and $0.75 is proposed for debt service. • Since 2002, the property tax supported, long-term debt as a percentage of assessed value has declined from 3.29% to 0.27% in 2021. This is primarily a result of using cash (rather than taking on additional debt) to fund certain capital projects and aggressive amortization schedules. In addition, the City uses other tools to reduce its debt service requirements such as debt refunding or refinancing when appropriate. FINANCIAL HIGHLIGHTS  The largest single revenue source in the proposed budget is the ad valorem (property) tax.  the City’s basic services such as Public Works, Police, Fire, Parks, Community Services and Library) increased by $29,410,507 This increase is primarily attributable to increases in property tax, sales tax and interest on investments. Business-type activities assets (such as water distribution, wastewater collection and other activities for which the City charges a fee to the customer to recover most or all of the costs) increased by $8,421,001. The majority of this change can be attributed to an increase in charges for service and decrease in expenses. At the end of the 2021 fiscal year, the unassigned fund balance for the General Fund was $15,810,846 or 36.7% of total General Fund expenditures. This same period, the City had an outstanding debt total of $116,303,677 a net decrease of $11,402,683 from the previous year. Governmental activities net assets (which include most of Government / Business Type Activities Unrivaled Quality Outstanding Value Highest Quality of Life  Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork Page 7 The City of Southlake Popular Annual Financial Report The city relies on several strategies to maintain a fiscally healthy government.  A financial trends monitoring system to monitor the financial condition of the City.  Analysis of trend data to guide the City’s financial plan.  Adherence to sound long established financial policies.  Diligent attention to strong stewardship of taxpayer dollars.  Sustainability Master Plan. Protecting the City’s Financial Health Government funds are used to account for the majority of the City’s activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities and/or objectives. The City currently maintains twenty-two individual funds including the General Fund, General Obligation Debt Services Fund, Crime Control District and Tax Increment Financing District Fund, just to name a few. Detailed information related to all City Funds can be found in the City’s Comprehensive Annual Financial Report located on the City’s website. The Statement Of Changes In Position, as presented below, presents information showing how the City’s net position changed during the most recent fiscal year. It focuses on both the gross and net costs of the government’s various activities and thus summarizes the cost of providing specific government services. Figure 1 below highlights the City’s government-wide position for the fiscal year ending September 30, 2021. Government Wide Highlights Figure 1 Page 8 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork The City of Southlake Popular Annual Financial Report The City of Southlake’s government- wide statement includes a statement of net position. This statement summarizes information on all of the City’s assets and liabilities including capital assets and long-term obligations with the difference between the two reported as the “net asset”. Over time, the increases and decreases in net position, also known as the City’s assets, may serve as useful indicators of the City’s financial condition. The total net asset balance of the City of Southlake reflects its investments in capital assets, less any debt used to acquire those assets that are still outstanding. As seen in Figure 2 to the left, capital assets of the City include land and improvements, buildings, infrastructure, water and sewer systems, roadway systems, machinery and equipment (net of accumulated depreciation) totaled $606,138,798 at the end of the fiscal year 2021. The City uses these capital assets to provide services to the public; consequently, these assets are not available to fund current operations and/or future spending. Total assets for the City of Southlake as of September 30, 2021 were $821,867,971. Total Liabilities for this same period were $131,165,100 total deferred outflows were $(5,836,152) and inflows of $(3,873,338) resulting in a net balance of $692,665,685 as seen in Figure 3 below. This chart illustrates the summary of the City of Southlake‘s Government-Wide Financial Net Position. STATEMENT OF NET POSITION Figure 3 Figure 2 Figure 3 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork Page 9 The City of Southlake Popular Annual Financial Report The General Fund Highlights The General Fund is the City’s principle operating fund. This fund is supported by taxes, fees and other revenues that may be used for a variety of purposes. The fund accounts for the normal recurring activities of the city and includes engineering, planning, finance, general governmental, police, fire, and administrative services. FY2021 received $52,425,073 in General Fund revenues, which is a increase of $3,058,947 or 5.8% from the previous fiscal year. As depicted in the pie chart to the right (Figure 4), the largest single revenue source to the City is the ad valorem (property) tax which provided $25,926,682 in total revenue for the General Fund. The second largest revenue source is sales tax with collections of $18,626,383. Franchise Fees (from private utility companies operating in the City) and License, & permits fees made up the third and fourth largest revenue collection with these sources producing $2,671,726 and $1,706,685 in total revenues for the City. Expenditures are budgeted according to when the liability (what is owed) is incurred, regardless of the timing of related cash flow. The exception is debt services, compensated absences, claims and judgments, which are budgeted as expenditures according to when the payments are due. The graph to the right (Figure 5) illustrates the City’s expenditure trends impacting the General Fund for those governmental activities serving the City of Southlake between October 1, 2020 and September 30, 2021. Total expenditures for FY 2021 equaled $43,105,963, a 7.3% or $3,171,002 increase from the previous fiscal year’s expenditures. Total expenditures included $3,247,009 in General Government expenditures which includes the City Secretary’s office, City Manager’s office, Human Resources, Economic Development and Support Services. The Finance & Information Technology Department accounted for $5,865,339 in total spending. Total General Fund expenditures also included $9,733,084 in Police services, Public Safety Support and Building Inspection costs; $10,059,078for Fire Services; $4,040,870 for Public Works, Streets and Planning Department costs, $4,266,695 for Support Services and $5,386,904 in cultural and recreational related expenditures which includes Library Services, Community Services, Parks & Recreation department costs. For more information , the AFR is also available online at: http://www.cityofsouthlake.com Figure 4 Figure 5 Page 10 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork The City of Southlake Popular Annual Financial Report In order to fund such long-term capital, the City issues general obligation bonds, certificates of obligation, combination tax and revenue certificates of obligation and tax notes to provide for the acquisition and construction of major capital facilities and infrastructure. Certificates of obligation are used to fund construction of city facilities such as buildings, roads and sidewalks. Revenue bonds are used to fund construction of city infrastructure such as water, sewer system improvements as well as park improvements. About one-third of the City’s debt service is funded through bonds tied to the City’s property taxes. For FY 2021, property tax supported debt service was about $8.0 million. Property tax supported debt is primarily used for the construction of local roads and sidewalks. The remainder of the City’s debt service (68%) will be funded by self-supporting debt. These debt payments will be made from special revenue such as voter-approved sales tax levies which have a specific revenue streams, many of which are voter approved, for the repayment of the bonds. Other self-supporting debt taken on by the City has funded improvements in Town Square such as Town Hall, roads, water, sewer, etc. FY 2021 debt service to be paid as self-supporting debt was $18,700,000. This debt is being repaid through the Tax Increment Reinvestment Zone, using tax dollars generated in the Square, including those collected by the City of Southlake, Carroll Independent School District, Tarrant County, the Tarrant County Hospital District and the Tarrant County College District. So other taxing entities are helping to repay this debt. Long-Term Financial Capital Planning The chart above (Figure 6) illustrates the total projected capital improvement costs from FY 2021 through FY 2024. The City takes it debt obligation very seriously. Several years ago, the City Council working with staff set goals to reduce the debt percentage of assessed valuation over the total long term debt. As a result, the City has been able to reduce the debt percentage from 3.29% in 2002 to 0.27% in 2021. Additionally, the City has a five (5) year funding schedule for the purchase, construction or replacement of physical assets of the City. Capital improvements typically have a useful life of over ten years and a value greater than $10,000. Funds for capital projects are appropriated on an annual basis. City staff budgets Capital Improvement Projects (CIP) for a five year period but also identifies a number of projects that cannot be addressed due to funding limitations. These projects are shown in out-years, but no plans are in place to address them as projected revenues will not accommodate their construction within the specified time frame. Projects approved for subsequent years are approved for planning purposes only and do not receive expenditures authority until they are part of the capital budget. It is through capital improvement programming that capital projects can be brought into line with the City’s long-range plans by balancing identified needs with financial capacities. Mobility Figure 6 Integrity ● Innovation ● Accountability ● Commitment To Excellence ● Teamwork Page 11 The City of Southlake Popular Annual Financial Report CITY OF SOUTHLAKE 1400 MAIN STREET, SUITE 430 SOUTHLAKE, TEXAS 76092 Postage STAMP TO: • The City is located in Northeast Tarrant and Southeast Denton counties. • Is best known for exemplary public schools, Southlake Town Square, and Carroll High School’s 8-time state champion football team. • The FY 2022 Adopted Budget reduced the City’s property tax rate from $0.405 to $0.39 per $100 net taxable valuation. The City’s property tax roll remained relatively flat with a decrease of 0.01 percent in net taxable value. As an element of the City’s tax relief initiative the homestead exemption was held at the maximum level of 20%. The estimate of the FY 2022 tax roll is based on the certified roll as provided by the Tarrant Appraisal District (TAD) in July. The assumed collection rate is one hundred percent . 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