DALLAS — As voters prepare to decide on a $150 million bond referendum, Fort Worth officials are mulling numerous operational changes to meet some budget shortfalls in the coming fiscal year.
The City Council intends to defer some nonessential services and transfer revenue from other accounts to bring the city’s reserve fund back to the mandated 10% of the annual operating budget, which is equal to about $51 million. The fund balance currently stands at $36.3 million, according to finance officials.
The entire bond package going before voters May 10 addresses much-needed street and roadway improvements across the North Texas city to keep pace with “unprecedented growth and development.”
Fort Worth has added roughly 135,000 new residents since the 2000 Census and is now the eighteenth largest city in the country, home to more than 667,000 people.
Earlier this week, the City Council agreed to use $15 million of revenue from natural-gas drilling on city property for additional street upgrades over the next four years. But state and federal law place some restrictions on how the gas revenue can be spent, and the city puts half the gas revenue it receives into a trust called the Fort Worth Permanent Fund, which also includes some endowments.
Fort Worth, as well as most of Tarrant County, has benefited recently from increased natural-gas drilling and production in the Barnett Shale, possibly the largest inland natural gas field in the world.
In March, Moody’s Investors Service downgraded its rating on the city’s general obligation debt to Aa2 from Aa1, citing the “continuing challenges related to the city’s financial reporting infrastructure.”
“Despite notable improvement in the quality and quantity of financial personnel over the past two years, antiquated information technology has contributed to significant delays in releasing audited financial statements,” analysts wrote. “Lack of timely information, reviewed by external parties to ensure fiscal integrity, hampers important decision-making by management and policymakers.”
The lower rating applies to about $371 million of general obligation debt outstanding. Moody’s also downgraded its rating on about $21.9 million of lease revenue bonds issued in 2004 on behalf of the city by Service Center Relocation Inc. to Aa3 from Aa2.
Last August, Fitch Ratings lowered its rating on the Fort Worth’s general obligation bonds and water and sewer system debt to AA from AA-plus due to the delays in the city’s filing of its comprehensive annual reports. The rating on its lease-revenue bonds was dropped to AA-minus from AA by Fitch.
“It’s a result of what we see as the city’s chronic issues of getting their CAFR’s filed on time,” Fitch senior director Steve Murray said then. “The city indicated to us that the delays are a reflection of an antiquated financial reporting and payroll system.”
Murray added that city officials have expressed concern over troubles attracting qualified people to fill open posts in the finance department. And the treasurer and accounting manager positions are still vacant.
Fort Worth’s filing delays started about three years ago when a new auditor ran into difficulty reconciling bank statements to the general ledger for fiscal 2007, according to analysts. The auditor noted “material weakness” in the reconciliation method, tracking of assets, and internal controls, Fitch said. Delays in filing the fiscal 2004 reports led to delays in completing the statements for the following two years as well.
The fiscal 2006 report still isn’t done and an analyst said it’s still unclear when it will be completed.
Standard & Poor’s rates the city’s outstanding GO bonds and water and sewer debt AA-plus. The lease revenue bonds outstanding are rated AA by Standard & Poor’s.