General Obligation Debt
The general obligation debt service fund provides for the payment of principal and interest on the City’s outstanding general obligation bonds, certificates of obligation and equipment acquisition notes, as well as interest on outstanding general obligation commercial paper. The City of Dallas does not issue bonds to the general public. Debt financing is used to pay for capital projects. By using debt, the project costs are allocated over the life of the asset. Capital projects may include improvements to and/or construction of the City’s street system, parks and recreational facilities, libraries, police and fire protection facilities, flood protection, and storm drainage systems. In FY 2010-11, a commercial paper program was implemented to interim finance voter-approved capital improvement projects. The fees associated with the commercial paper program are included in the General Fund budget. The interest on outstanding commercial paper is paid by the Debt Service Fund.
The Financial Management Performance Criteria (FMPC) address debt management and other requirements adopted by the City Council. The FMPC provides additional guidance on the issuance of debt including restricting the length of maturities and outlines the amount and purpose for which bonded debt may be issued.
Convention Center Debt
The Convention Center debt service fund provides for the payment of principal and interest on the Convention Center’s outstanding revenue bonded indebtedness. In February 2009, the Convention Center Complex issued $324.94 million in refunding and improvement revenue bonds. This issue included the refunding of all of the Convention Center’s $261.36 million outstanding debt and also included $63.58 million of new money. Of the new money issuance, $60.80 was allocated for improvements to the Dallas Convention Center.
7% Hotel Occupancy Tax, non-operating revenue of the Convention Center Complex, and interest earned on cash balances in the bond reserve fund transferred to debt service funds are pledged for repayment of the debt. These revenues from the Convention Center Complex are transferred to the debt service fund to meet annual principal and interest payments. Additionally, the City has covenanted to provide for the payment of operating and maintenance expenses of the Convention Center Complex, should a shortfall in Convention Center revenues occur.
Dallas Water Utilities Debt
The debt service component of the operating budget for Dallas Water Utilities (DWU) provides for payment of principal and interest on DWU’s indebtedness. The budget for these payments is prescribed by the following standards:
- The Dallas City Charter provides in Chapter XI, Section 14 that all water and wastewater costs (including debt requirements) shall be paid for from customer service revenues.
- Revenue bond ordinances provide that customer service revenues solely secure water and wastewater bonds.
- Financial criteria for DWU provide for financing of capital improvements (effectively defined as capital projects with useful lives of 20 years or longer) either from debt or directly from revenues, to maintain system equity levels.
In addition to revenue bonds, debt sources include tax-exempt commercial paper notes (CP), which are utilized for interim financing of capital construction projects. On at least a bi-annual basis, commercial paper is refinanced and retired with revenue bonds. This process lowers overall interest costs and provides greater financing flexibility. Debt sources also include certain contractual obligations whereby DWU reimburses other agencies for debt incurred to construct joint-use facilities. Under these contractual agreements DWU makes payments in proportion to its allocated share of the joint use facilities.
Debt Service Payments
Disclaimer: Certain City of Dallas transactions are withheld from this register for reasons of confidentiality and adherence to State and Federal laws which require vendor anonymity.