City budget maneuvers raise concern
City Council member Tom McCabe on Monday raised concerns about an interdepartmental transfer of funds that he argued is being done without the public’s knowledge or consent.
And, McCabe has charged, the money is being improperly earmarked to be spent to build a light-rail system between the Pitkin County Airport and the center of town.
The money, roughly $1 million that is transferred each year from the city’s water fund to the general fund, is an internal form of repayment for past city investments in the water department’s equipment and operations.
The City Council three years ago ordered an internal study to see if the water department’s operations would be harmed if about $500,000 of that money were to be earmarked for a planned light-rail system. The study indicated it would not hurt the water department, according to Assistant City Manager Steve Barwick, and the council went ahead with the transfer arrangement.
During a budget session yesterday, the council agreed to review the arrangement again.
“Is this a tax in disguise? Is it a violation of state law?” asked Councilman Tony Hershey.
A 1996 memo from City Attorney John Worcester indicated the transfer would be legal and appropriate when viewed in the same light as “a reasonable rate of return on investments.”
McCabe, who discovered the transfer when going over the city’s proposed budget for next year, wants the council to hire a consultant to assess the value of the water department’s assets and determine whether the interdepartmental transfer of funds is legal and proper.
“The water department consistently makes half a million more than it needs to do its job,” McCabe declared at Monday’s budget work session. “That money can be allocated in other ways.”
He said the council should ask the citizens whether they want the money returned to them in rebates or used on city projects.
Barwick said that, since the water department has assets of perhaps $20 million (not including water rights), the city is getting what could be considered a 2.5 percent rate of return on its investment in the city’s water system.
But, McCabe countered, regardless of that argument, the $500,000 is not needed for water department operations, and added, “I want to avoid having the city exposed to lawsuits.” He claimed to know of other towns that have faced legal action over similar issues.
But Mayor Rachel Richards argued that the City Council has a duty to run the city, and spend the citizens’ money in ways that cannot always be subject to electoral contests.
For example, she said, the money transferred from the water fund could be used to pay for a schematic design of a proposed ice rink facility next to the planned new municipal swimming pool. She rattled off a number of other “critical needs” that the money could be for, and concluded, “I think that’s what leadership is.”
She called it “irresponsible and reckless” of McCabe and Hershey to try to dismantle internal funding mechanisms simply out of fear that some money might in the future be used to pay for a train system into town.
“I agree we don’t want to go to the citizens with every little thing,” conceded McCabe, adding that it may be wise to “highlight those things that might be questionable.”
After considerable debate, the council agreed that a study of the water department’s assets and the “return” being paid to the general fund is warranted. Barwick was directed to figure out what it would cost and how it should be handled, and report back to the council.
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