Southlake, TX — FY2026 Adopted Budget Review

I. Executive Summary

Southlake adopted its FY2026 budget on Sept. 16, 2025, continuing a long record of disciplined finances: a property tax rate of $0.295/$100 (lowest since the mid-1980s, 8th consecutive cut), a 25% General Fund reserve, and tax-supported debt down ≈62% since 2010. The standout structural feature is heavy reliance on sales tax (29% of all-funds revenue, exceeding property tax at 23%), a strength today but an exposure as the affluent retail-driven city approaches build-out.

Total Budget: $137,682,832 (all funds expenditures); $56,413,838 General Fund | Per Capita: ≈$4,410 all funds / ≈$1,807 General Fund (pop 31,223) | Fund Balance: 25% of General Fund (≈$14.4M reserve) — well above 15% target; healthy | Debt Load: All-funds debt service $16,801,412; tax-supported GO debt ≈$29.8M (≈$954/capita); debt = 0.23% of taxable value

II. Socioeconomic Context & Peer Comparison

Southlake is one of Texas’s wealthiest cities: median household income roughly $250,000 (top-coded by Census), poverty rate ≈1.55%, median age 43. Unemployment is well below the Texas average (≈4%). Population ≈31,223 (2026 est.), essentially flat as the city nears residential build-out. Size/affluence peers in the DFW metroplex: Colleyville (≈26k), Keller (≈45k), and Coppell (≈42k).

Population & Economic Trends

Population is stable-to-flat (31,137 in latest Census; ≈31,223 estimated 2026). Southlake is largely built out, which the CFO cites as the reason for maintaining strong reserves and careful debt management.

Peer Comparison

Town	Population	Total Budget	Per-Capita	Notes
Colleyville	26000
Keller	45000
Coppell	42000

III. Revenue & Expenditure Ledger

Where the Money Comes From

All-funds revenue FY2026 = $154,402,294. Major sources: Sales Tax $45,163,040 (29.3%); Ad Valorem/Property Tax $34,920,033 (22.6%); Water Sales–Residential $20,140,000 (13.0%); Wastewater $11,500,000; TIF District $10,376,956; Charges for Services $6,452,033; Water Sales–Commercial $5,745,000; Interest Income $5,334,900; Franchise Fees $3,384,208; Sanitation $3,185,000; Hotel Tax $2,600,000. (Source: Budget Book, Fund Summaries, pp.240-241)

Where the Money Goes

All-funds expenditures FY2026 = $137,682,832, up 5.5% YoY. By function: Public Works $33,439,076 (incl. water/wastewater); Public Safety $25,086,130; Debt Service $16,801,412; General Government $11,856,279; Community Services $11,108,751; TIF District $10,401,059; CEDC $8,299,154; Vehicle Replacement $6,058,612. By category: Operations $57,005,962 (41%); Personnel $52,171,719 (38%); Debt Service $16,801,412 (12%); Capital Outlay $11,703,739 (9%). General Fund alone = $56,413,838, led by Public Safety. (Source: Budget Book, Fund Summaries, pp.241-264)

5-Year Trend

Year	Total Revenue	Total Expenditure	Fund Balance
2024	147954720	114782444	156010580
2025	151005034	127002026	161213587
2026	154402294	137682832	160808049

IV. Debt, Pensions & Long-Term Obligations

Bonded Debt: ≈$29.8M tax-supported (GO/CO), est. from ≈$954/capita; down ≈62% since 2010; full issue-level detail in ACFR

Unfunded Pension Liability: Texas Municipal Retirement System (TMRS); net pension liability not stated in budget book — see City ACFR

OPEB Liability: Not disclosed in the budget book — see City ACFR for OPEB net liability

Debt Service as % of General Fund: All-funds debt service $16.8M = ≈12% of total expenditures; tax-supported portion modest relative to General Fund

Southlake has aggressively de-leveraged: property-tax-supported debt is down ≈62% since 2010, per-capita tax-supported debt fell from $3,506 (2010) to $954 (2025), and debt as a share of taxable assessed value dropped from 3.01% (FY2003) to ≈0.21% (FY2025), estimated 0.23% in FY2026. The City states all existing tax-supported debt will be retired within ≈7-10 years and is funding $17,125,000 of FY2026 capital with cash. >$120M in capital projects are planned over the next several years; final cash-vs-debt split set with the Feb. 2026 CIP. Pension (TMRS) and OPEB net liabilities are not broken out in the budget book and should be checked in the ACFR.

V. Community Impact Analysis

A. Education & Youth Programs

The City funds school-zone safety and resource officers and partners with Carroll ISD; municipal budget does not fund schools directly (separate taxing entity). Library Services budget $1,330,426 supports youth programming.

B. Facilities, Infrastructure & Parks

Strong reinvestment: >$120M capital program planned; $17.125M cash-funded in FY2026 for streets, drainage, water, wastewater, parks and facilities. Parks & Recreation $8.2M (all funds); SPDC capital $1.02M; Facility Maintenance capital $1.16M. Pay-as-you-go cash funding reduces interest cost.

C. Public Safety Staffing & Allocation

Public Safety totals $25,086,130 (Fire $13,341,883; Police $9,811,691; Support $1,932,556), up 5.0% YoY, plus a Crime Control District Fund of $2,699,896. City targets the 85th percentile for public-safety pay — generous staffing/compensation relative to peers.

Generous senior relief: $75,000 over-65 exemption, $75,000 disability exemption, and an over-65 City tax freeze. Community Services budget $1,545,228. Very low poverty (≈1.55%) limits social-service demand.

VI. Major Financial Red Flags & Ghost Indicators

Medium · Sales-tax dependence approaching build-out

Sales tax is $45.16M (29.3% of all-funds revenue), exceeding property tax ($34.92M, 22.6%). The CFO publicly notes 'shifts in revenue as we approach build-out.'

How would a retail downturn or build-out plateau in sales-tax receipts affect services, and what contingency does the reserve provide?

Source: Budget Book, Fund Summaries pp.240-241; My Southlake News (Sep 18, 2025)

Medium · Expenditure growth outpacing CPI guideline

Projected expenditure growth was ≈5% vs. the City's 2.5% CPI guideline; driven by a market-leadership pay philosophy (85th percentile public safety, 70th general government). All-funds spending rose 5.5% YoY.

Is above-CPI compensation growth sustainable against flattening sales-tax and property-value growth as the city builds out?

Source: Budget Book, Budget Overview p.20

Low · Strategic Initiative Fund spending up 515%

Strategic Initiative Fund expenditures jump from $262,928 (FY2025) to $1,616,834 (FY2026), a 514.9% increase.

What specific projects drive the Strategic Initiative Fund increase, and are they one-time or recurring?

Source: Budget Book, Fund Summaries p.256/261

Low · Pension/OPEB liabilities not in budget book

The budget book references TMRS retirement benefits but does not disclose net pension or OPEB liabilities; these are only in the ACFR.

Could the City summarize net pension and OPEB liabilities in the budget book itself for resident transparency?

Source: Budget Book, Budget Overview (TMRS references)

VII. Governance & Transparency Audit

Transparency is strong. The full budget book is posted online, chapter-by-chapter plus a flipbook, with a dedicated FY2026 page and a contact form for budget questions. Two public hearings and two readings were held (Sept. 2 and Sept. 16, 2025) following an Aug. 19 overview, exceeding minimum notice norms.

Budget document publicly available: Yes — easy to find at cityofsouthlake.com/FY2026; full document and chapters publicly posted online. | Last audit published: City publishes an Annual Comprehensive Financial Report (ACFR) annually; latest available via the City Financial Reports page. | Public hearings held: Aug 19, 2025 overview; Sept 2, 2025 first reading + hearing; Sept 16, 2025 second reading + hearing (adopted).

VIII. Policy Options & Strategic Recommendations

Publish a sales-tax sensitivity/scenario analysis and a build-out revenue transition plan. 2) Summarize TMRS net pension and OPEB liabilities directly in the budget book, not only the ACFR. 3) Provide a multi-year compensation forecast showing how the 85th/70th-percentile pay philosophy is funded as revenue growth flattens. 4) Continue pay-as-you-go capital funding and publish the Feb. 2026 CIP cash-vs-debt split with rationale. 5) Explore shared services with adjacent DFW suburbs (Colleyville, Keller, Grapevine) for fleet, IT and dispatch.

IX. Citizen Action Guide

Read the budget at cityofsouthlake.com/FY2026 and submit questions via the City’s budget contact form. 2) Attend the Aug-Sept budget hearings and the Feb. 2026 CIP adoption to weigh in on capital priorities. 3) File a public information request for the latest ACFR to verify pension/OPEB figures. 4) Track sales-tax receipts via the City’s Open Data / monthly financial reports.

Next budget hearing: Next budget cycle hearings expected Aug-Sep 2026; Capital Improvements Program adoption ≈February 2026.

FOIA contact: City Secretary’s Office / Public Information Requests, 1400 Main Street, Suite 460, Southlake, TX 76092; 817-748-8400; cityofsouthlake.com/3847/Public-Information-Requests

X. Conclusion & Long-Term Outlook

Southlake enters FY2026 in excellent fiscal health: low and falling taxes, a fully funded 25% reserve, rapidly shrinking debt, and large cash-funded capital investment. The defining 5-10 year question is the revenue model: with the city nearly built out and sales tax supplying ≈29% of revenue, growth in the largest revenue source will slow even as a market-leading compensation philosophy pushes spending above CPI. The City’s strong reserves and low debt give it real flexibility to manage that transition — provided it plans now for a flatter revenue curve. Absent that planning, structural pressure could emerge late this decade despite today’s strength.