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RES 2026-17 FY 27 Debt Financing Plan TOWN OF TROPHY CLUB, TEXAS RESOLUTION NO. 2026-17 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF TROPHY CLUB ESTABLISHING THE DEBT FINANCING PLAN AND TAX RATE GOAL FOR THE FISCAL YEAR 2027 BUDGET AND THE FISCAL YEAR 2027-2032 CAPITAL IMPROVEMENT PROGRAM; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Town of Trophy Club, Texas (the "Town"), recognizes the importance of managing its fiscal responsibilities to promote sustainable growth and long-term financial stability for the community; and WHEREAS, debt financing is an essential strategy for raising capital to invest in critical infrastructure projects, including road repair and replacement, sidewalk replacement projects, and other infrastructure and facility needs that are vital to the Town's continued development and quality of life; and WHEREAS, by responsibly issuing bonds and other forms of debt, the Town can smooth the budgetary impacts and maintain stable tax rate levels over time, ensuring that necessary projects are completed without undue financial strain on current or future budgets; and WHEREAS, the Town Council recognizes the need to establish a debt financing plan in conjunction with the annual budget and Capital Improvement Program to ensure that the necessary capital for funding these projects is both budgetarily achievable and sustainable within the Town's desired long-term tax rate goal; and WHEREAS, the Town's "Debt Financing Plan and Tax Rate Goal", as detailed in the attached Exhibit A, provide a comprehensive approach to leveraging future revenues to address current infrastructure needs, and balancing immediate expenditures with long-term fiscal responsibility. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF TROPHY CLUB, TEXAS, THAT: Section 1. The facts and recitals set forth in the preamble of this Resolution are hereby found to be true and correct. Section 2. The Town Council hereby establishes the debt financing plan for the Fiscal Year 2027 Budget and the Fiscal Year 2027-2032 Capital Improvement Program, as outlined in the attached Exhibit A, to guide the Town's financial decisions regarding capital investments. Section 3. The Town Council adopts the tax rate goal for the Fiscal Year 2027 Budget and the Fiscal Year 2027-2032 Capital Improvement Program, as outlined in RESOLUTION 2026-17 PAGE 2 the attached Exhibit A, as part of its commitment to maintaining fiscal responsibility and ensuring the Town's financial health. Section 4. The Town Manager is hereby directed to implement the "Debt Financing Plan and Tax Rate Goal" as part of the budgetary process for Fiscal Year 2027 and to periodically report progress to the Town Council. Section 5. This Resolution shall take effect from and after its date of passage in accordance with law. PASSED and APPROVED by the Town Council of the Town of Trophy Club, Texas on this 24TH day of August 2026. --) ,. .-- te Jeanne T : ny, ayor ATTEST: T5Y-Ift) Of TROP,e, Tammy Dixon, own Secretary O 0 r- \imp— c co * pi APPROVED TO AS FORM: '1 '' e yr Dean r.li4rgia, T .r ey RESOLUTION 2026-17 PAGE 3 EXHIBIT A DEBT FINANCING PLAN & TAX RATE GOAL PREPARED BY FINANCE DEPARTMENT TROPHY CLUB TEXAS 2026 2027 A D O P T E D Q U O T E Debt Burden Goals Over time, the Town of Trophy Club will manage its debt portfolio in a manner that supports long-term financial sustainability, minimizes budgetary impacts, and promotes stability in the Interest & Sinking (I&S) tax rate. The Town will pursue the following debt burden goals: Maintain manageable debt levels. Annual debt service obligations supported by the Town’s I&S tax rate should generally not exceed an amount equivalent to $0.105 per $100 of taxable valuation. Promote stability through structured debt service. Debt issuances should be structured and layered to produce relatively level and predictable annual debt service requirements over time, avoiding significant fluctuations whenever practicable. Account for growth in taxable valuation. Future debt capacity and annual debt service requirements should be evaluated in conjunction with anticipated growth in the Town’s taxable valuation to support a stable I&S tax rate. F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L Q U O T E Incorporate future borrowing needs into long-range forecasts. Anticipated debt issuances should be incorporated into financial projections throughthe remaining term of currently outstanding debt. This long-range approach is intended to ensure that future capital needs can be financed without exceeding the Town’s established I&S tax rate goal. Minimize long-term interest costs when feasible. The Town should evaluate opportunities to shorten debt maturities when doing so will reduce total interest costs without compromising the Town’s debt burden or tax rate goals. While a maximum 15-year term may be appropriate for certain long- lived infrastructure, 10-year maturities should be utilized when financially feasible. Current forecasts indicate that increased use of 10-year maturities may become achievable beginning in approximately 2042. Plan for the long-term debt service profile. As the Town layers additional debt issuances approximately every two to three years, annual debt service is projected to increase from approximately $2.9 million in the current fiscal year to approximately $45.5 million within the next 20 years. During this period, growth in taxable valuation is expected to allow the I&S tax rate to remain relatively stable. As existing debt is retired and the debt portfolio matures, annual principal and interest payments are expected to stabilize with only slight increases each year based on anticipated property tax valuation growth. Match debt maturities to the useful life of capital assets. Long-lived infrastructure—including roads, sidewalks, medians, storm drainage systems, public facilities, and parks—may be financed with debt when appropriate, with a maximum repayment term of 15 years. Debt should not extend beyond the reasonably anticipated useful life of the asset or improvement being financed. F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L Q U O T E Use shorter financing terms for shorter-lived assets. Vehicles, equipment, and other capital assets with useful lives of less than 10 years may be debt financed with a maximum repayment term of 5 years, provided the financing term does not exceed the anticipated useful life of the asset. Tax Rate Goal Under Texas law, the Town of Trophy Club may levy an Interest & Sinking (I&S) tax rate on taxable property within the Town to fund eligible debt service obligations. It is the Town’s intent to fund eligible tax-supported debt service through the I&S tax rate. Maintaining a stable and sustainable I&S tax rate is an important component of the Town’s long-term capital financing strategy. Given the limitations of the operating budget, significant infrastructure needs—such as roads, sidewalks, storm drainage systems, medians, parks, and other public improvements— cannot reasonably be funded solely through annual operating revenues. Accordingly, Town staff will annually present prioritized capital and infrastructure needs to the Town Council for consideration as part of the Town’s long-range debt financing plan. The Town’s I&S tax rate was $0.1031 per $100 of taxable valuation in FY 2026 and proposed at $0.1000 in FY 2027. The Town’s long-term goal is to maintain the I&S tax rate at or below $0.105 per $100 of taxable valuation. Based on the FY 2027 rate, approximately $0.005 per $100 of taxable valuation remains unused below the established $0.105 target. As part of the annual budget and tax-rate process, staff will evaluate and present financing options designed to address capital needs while maintaining the I&S tax rate within the $0.105 goal. F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L QUOTE To minimize the impact of debt financing on the Town’s overall property tax rate, the Town will seek, when financially feasible, to offset increases in the I&S tax rate with corresponding reductions in the Maintenance & Operations (M&O) tax rate. This approach is intended to provide capacity for long-term capital investment while promoting stability in the Town’s overall property tax rate. For long-range planning purposes, the Town’s debt financing model assumes 3.0% annual growth in taxable valuation through FY 2056. These assumptions are intended to provide a prudent basis for evaluating future debt capacity and will be reviewed and updated periodically based on actual taxable valuation, economic conditions, capital needs, and other relevant factors. Prior to each debt issuance, projected taxable valuation and debt capacity will be reassessed using the most current information available. For FY 2027, the Town’s total taxable valuation is approximately $2.788 billion. Assuming annual taxable valuation growth of 3.0%, the Town is projected to exceed $3.0 billion in taxable valuation by approximately FY 2030. F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L QUOTE Strategies for Maintaining the I&S Tax Rate Goal As the Town works to maintain an I&S tax rate at or below $0.105 per $100 of taxable valuation, available debt capacity should be strategically utilized to address eligible capital needs while supporting the Town’s long-term debt burden goals. The following strategies may be considered: Debt Defeasance. When available I&S capacity exists and no eligible capital projects, equipment, vehicles, or other financing needs have been identified, the Town may evaluate opportunities to defease or retire outstanding debt. Debt defeasance may be used to reduce future principal and interest obligations, create capacity for future capital needs, and support the Town’s long-term debt and tax-rate objectives. Short-Term Debt for Capital Needs. When eligible vehicles, equipment, or other shorter-lived capital assets are identified, the Town may utilize short-term debt with a maturity not to exceed five years, provided the financing term does not exceed the anticipated useful life of the asset. This approach allows the Town to address necessary capital needs while preserving longer-term debt capacity for infrastructure and other long-lived improvements. F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L F Y 2 0 2 7 D E B T F I N A N C I N G P L A N & T A X R A T E G O A L Conclusion The FY 2027 Debt Financing Plan and Tax Rate Goal establishes a long-term framework for addressing the Town of Trophy Club’s capital and infrastructure needs while maintaining fiscal responsibility and tax rate stability. Through strategic debt issuance, prudent management of the I&S tax rate, and long- range planning for future capital needs, the Town can invest in essential infrastructure while maintaining manageable debt levels and preserving financial flexibility. This plan provides a disciplined approach for balancing current and future infrastructure needs with the Town’s commitment to responsible stewardship of taxpayer resources. By regularly evaluating debt capacity, taxable valuation growth, financing terms, and anticipated capital needs, the Town can adapt its financing strategy over time while supporting a stable and sustainable financial position for the community.