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Resident challenges proposed $7 million transfer from utility funds; finance interim director cites bond counsel and law
Summary
During the budget public hearing, Sammy Smith criticized proposed transfers of more than $7,000,000 from enterprise (utility) funds into the general fund as unreasonable and possibly restricted by law; Interim Finance Director Todd Simono said bond counsel and staff consider the transfers lawful and reasonable under cited code and bond ordinances, and the council postponed final budget approval until Sept. 16 to meet charter timing.
Sammy Smith told the council he has opposed water and sewer rate increases and transfers from enterprise funds for years and that the proposed budget shows transfers of more than $7,000,000 from enterprise funds into the general fund.
"The city is proposing this year to transfer over $7,000,000 into the general fund," Smith said, calling that amount "not reasonable" compared with survey guidance suggesting transfers closer to 7% of a general-fund operating budget.
Smith raised legal questions about transfers when revenue bonds are outstanding, citing statutory language he referenced as "15 o 2.058" and a related exception. He said citizens and bond buyers would expect disclosure if net utility revenue were to be diverted.
Todd Simono, interim director of finance, provided a staff handout and told the council he had referred the question to bond counsel. Simino cited language in the city’s water and sewer revenue bond ordinances and a government-code citation (recorded in the handout as "1,502.059") and summarized counsel's opinion that, after paying operating expenses, debt service and required reserves, net revenues may be appropriated as permitted by law. "Everything is legal," Simono said on the record.
The meeting record includes a discussion of audit observations by Patillo, Brown & Hill describing higher-than-typical interdepartmental transfers (speakers referenced transfer rates around 21%–23% versus the 2%–7% commentary used as a benchmark). Smith suggested a long-term plan to reduce transfers; staff and council described transfers as a routine mechanism (payment in lieu of taxes or indirect-cost reimbursement) that helps allocate overhead costs to enterprise funds.
Action and next steps: Council closed the public hearing and staff advised that charter timing prevented immediate final adoption because the required two-week waiting period after the published notice had not elapsed. Staff asked the council to postpone final budget approval until the Sept. 16 meeting; that postponement was placed on the record as the requested action.
Quotes are drawn from the public hearing and staff presentation; no ordinance adopting transfers was passed at this meeting.
