Council adopts fund-balance and debt policies setting reserve and debt-service limits

The Zephyrhills City Council voted Aug. 25 to adopt a fund-balance policy and a debt policy intended to stabilize reserves and set parameters for future bond issuances.

Why it matters: The policies are preparatory steps for a contemplated bond issuance tied to capital projects. A clear fund-balance target and a cap on debt service help preserve creditworthiness and show fiscal discipline to rating agencies.

Finance Director Ted Beeson recommended setting a 25% fund-balance target for operating expenditures in the general fund and the water-and-sewer fund. The council approved that recommendation. Beeson said 25% generally provides the city with about three months of operating reserves, which is a standard rule of thumb for municipalities preparing for potential debt issuance.

On debt policy, staff proposed limiting annual debt-service payments to 10% of general-fund revenues, including the penny-for-Pasco receipts in the calculation. Beeson described that threshold as a guideline that would allow approximately $2.6 million in annual debt payments under current revenue assumptions; an absolute ceiling of 15% (roughly $4.0 million) was also noted as a maximal limit.

Council members asked how current obligations factor in; staff said the building debt represents about $600,000 of current payments and that enterprise funds would also carry portions of future debt service for specific projects where appropriate.

Action: Council approved the fund-balance and debt policies by unanimous vote.

Provenance: Finance Director presentation and council vote recorded in the Aug. 25 City Council meeting minutes.