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CITY OF LA PORTE <br />FINANCIAL CONDITION DISCUSSION <br />• MARCH 1995 <br />The measurement of financial condition for a municipality is different than that of a for-profit business. <br />A for-profit business is created to return a profit to its investors and is measured by the amount of money <br />it makes. A municipality is created to provide services to its citizens and is measured by the quantity and <br />quality of the services it delivers. A municipality measures its financial condition in several different <br />ways, some of which are presented below. <br />BOND OR CREDIT RATING <br />The bond or credit rating is a financial measurement indicator that is provided by Moody's Investor <br />Service and Standard & Poor's corporation. It is determined by analysts at each firm after a review of <br />the financial statements and other factors of the municipality. The rating is used by investors who <br />purchase and trade the outstanding bonds of the municipality. The City currently has an "A" rating from <br />Moody's Investor Service and an "A+" from Standard & Poor's Corporation on its general obligation <br />bond issues. <br />STABILITY OF TAx RATE <br />The stability of the tax rate of a municipality is an indicator of their ability to manage revenue inflows <br />and provide services within established limits. A municipality that can continue to provide quality level <br />of services and provide new services, without having major variations in their tax rates, demonstrates <br />their ability to adequately manage their resources. The current tax rate for the City of La Porte is the <br />sixth year it has remained at 71 cents per $100 of assessed valuation. <br />DEIYr RATIO <br />The ratio of debt requirements to operation requirements provides a measurement of the fiscal <br />responsibility of the municipality. The industry standard is that the percentage of the annual tax rate that <br />is used to service debt should not exceed 40% of the tax rate and that a city in good financial condition <br />will achieve a 25% debt ratio. La Porte has taken a conservative position on its issuance of bonded debt. <br />The current tax rate is 71 cents per $100 dollar valuation and 16 cents of that rate is for the retirement <br />of debt. This means that 22.5% of its taxes are used to service debt and 77.5% is used for operations. <br />The table at the right compares the City debt <br />Percent of Tax Rate <br />ratio with that of local area cities. As you can <br />City <br />used to Service Debt <br />see, La Porte has achieved one of the lowest <br />debt ratios in our area. <br />Bellaire <br />19.6% <br />La Porte <br />22.5% <br />The City has been very attentive in addressing <br />Deer Park <br />24.3% <br />its debt. It was just eight years ago that the <br />Rosenburg <br />25.6% <br />debt ratio for the City was 47.8%. It was <br />Missouri City <br />27.4% <br />through hard work and proper planning that <br />Alvin <br />29.2% <br />this ratio was brought to a comfortable level. <br />Seabrook <br />32.4% <br />Baytown <br />37.2% <br />The current long range debt plan for the City <br />Pearland <br />37.2% <br />shows the longest maturity of existing debt to <br />West University <br />40.1% <br />be 10 years. A cash flow analysis for the next <br />Sugar Land <br />47.5% <br />six years shows no change in the debt tax rate. <br />Pasadena <br />56.4% <br />