Wringing Out the Budget
City council to consider using water funds for other operations while opponents question legal maneuverings and precedentLocal NewsMonday, July 6, 2015
Whether the city can move millions from the water fund to the general fund to balance the upcoming fiscal year’s budget is one of the big matters on the table for the July 8 City Council meeting.
But the mechanism officials will consider—an ordinance to allow the city annually to transfer as much as 12 percent of excess cash balances from enterprise funds to the general fund—could have more long-lasting consequences.
This year, the enterprise fund in the spotlight is a pot of reserves mostly amassed from the city’s water users, who pay one of the highest rates in the country, and from taxes paid at cash registers citywide.
Without the proposed transfer of a total of $4.7 million, the city’s Fiscal Impact Report states, “next year’s budget will come up short by $3 million” and the city’s total operating deficit, which already stands at $11 million, will notch upward.
The ordinance would amend an existing ordinance allowing the city to transfer up to $1.7 million annually from the enterprise funds that also include operations like the municipal airport and trash collection. Without the transfer this year, officials say the next option is to cut services or lay off staff, or to increase taxes.
The budget drafted by City Council for the fiscal year which began July 1 relies on that transfer, and without it, the city will have to re-do the budget by the state’s July 31 deadline.
The ordinance failed to pass the Public Utilities Committee in a June 3 meeting, with Councilors Joseph Maestas, Patti Bushee and Bill Dimas against and Chris Rivera and Peter Ives for the measure. During that committee discussion of the ordinance, Bushee stated, “This is not a one time deal and it is the wrong approach.”
Councilor Ives countered that without the approval of this ordinance, the city budget not only isn’t balanced, but violates existing ordinance.
“I think it’s necessary to move this forward so we didn’t get caught in the circumstance of having approved a budget that legally violates our own ordinances,” he said during the June committee meeting.
The proposed ordinance initially stated that such transfers are intended for “extraordinary duly incurred costs of non-routine city services attributable to operation and maintenance of the enterprise or enterprise fund.” Given that prior transfers of funds from the Water Division have paid salaries for full time employees, which is not a non-routine service, the Finance Committee struck that word from the draft. It also added a sunset clause of June 30, 2016.
While the budget details aren’t necessarily a hot topic for public comment considering recent debates over development, there’s still a cry of opposition that’s gaining momentum.
The Santa Fe Coalition for Good Government’s director, Mary Walta, raised concerns in a June 25 letter emailed to the mayor and city councilors, as well as the Office of the State Auditor and to the New Mexico Department of Finance and Administration (DFA).
The city has failed to provide compelling reasons for using the Water Division’s funds to pay for city operations when lower city revenues have been an ongoing issue for years and should be accounted for in the city’s budget, says the letter, which also notes, “Most, if not all, of the $11 million shortfall is attributable to increased salaries and employee benefits for current and new city employees.”
The city had no legal authority to present a budget to the state that relies on a funds transfer that is not authorized per existing city ordinance, she adds. “Hopefully, city councilors who oppose use of water funds for non-water related purposes will not feel compelled to now cover the city’s tracks on what amounts to clear overreaching of authority,” Walta’s letter reads. “Likewise, hopefully the DFA will take a dim view of this sort of ex post facto authorization in the budgeting process.”
She adds that without a concrete plan to increase revenues, this transfer sets a precedent for using enterprise funds to close gaps in the budget the city should expect to see repeated in years to come.
The coalition also questioned the legality of the city’s considered rededication of the ¼ of 1 percent municipal capital outlay gross receipt tax that was approved by voters in 2004 to fund water-related projects, stating that “rededication of the 2004 tax revenues without voter approval would be illegal."
With the Water Division’s estimated 800 miles of aging infrastructures and hundreds of millions to spend on capital projects planned for the next 10 years, the funds can hardly be spared. And if there are no water-related projects that need to be funded, the coalition contends, then water rates need to be reduced. But that idea isn’t apparently up for discussion.
“Water is more important than money. It’s priceless,” Carolyn Sigstedt, Santa Fe businesswoman and the lone public commenter at the Public Utilities Committee meeting, tells SFR. “[City council] should see that. It’s not enough for them to say ‘We’ll never do this again.’ It’s just too easy.”
The Wednesday City Council meeting is set to begin at 5 pm in the gym at Santa Fe High School. A proposed development on Old Santa Fe Trail is also on the agenda.