Sunday, April 21, 2013

Backdrop fo Councilman Morrison's Question on Water Rebates

Nearly six years ago Fitch Ratings had this to say about the City of San Angelo's general obligation bonds:

Fitch noted in a statement issued through Business Wire that next week about $45 million worth of the now-upgraded San Angelo general obligation bonds and certificates of obligation are scheduled to go on sale through an offering led by RBC Capital Markets. The proceeds will be used on the city’s ailing water and sewer systems and other public works projects.

“The rating upgrade to AA reflects the city’s sound financial profile and steady economic growth, as well as recent capital and debt-related developments at the city, including the initial adoption of a formal capital improvement plan and utility rate hikes that are expected to provide more than $5 million annual for system improvements and should minimize future borrowings,” Fitch said.

The city recently enacted substantial increases in water and sewer rates.
Since then the City issued $148 million in water related debt, which required another round of utility rate hikes.   So much for minimizing future borrowings. 

 Water revenue soared with the 2011 rate increases.

This is the backdrop for Councilman Morrison's asking about the Water Operating Fund and why there never seems to be money available to return to citizens.  At the last Council meeting Assistant City Manager/Chief Financial Officer Michael Dane cited seasonality in water revenues, yet he never showed any data or graphs.  He did cite his concerns over the expected March fund balance.being a mere $122,000.  This raised questions in my mind, which I researched using the last three City Operating budgets.

Did you know the Water Operating Expense budget was revised $800,000 higher last year and City Council said nothing?  My guess is they didn't know about it.

Who knew Water Utilities Administration transfers out roughly $2.5 million a year?  To where?  Was this Will Wilde's kitty to do with as he pleased?

The City's various Water buckets have transfers in and transfers out.  Another transfer out is from the Water Operating Fund, the source of possible citizen rebates.  Last fiscal year it stood at $5.4 million and is a projected $6.1 million for the current year.  Those transfers did not exist in the past and were not mentioned by Dane when he cited the paltry $122,000. 

The public saw ex-Water Chief Will Wilde retire under a firestorm of ethical concerns.  Water revenue grew by orders of magnitude under Will's tenure.  Financial malfeasance occurs when someone has unilateral control over money, i.e. there are no checks and balances.

Mayor Alvin New and three other council members see the annual financial audit as an endorsement that no wrongdoing has occurred.  Yet, most financial crimes aren't exposed by an annual accounting audit.  They're revealed by a whistle blower or the perpetrator's hubris, which led to a mistake.  Wilde had hubris in spades, as evidenced by the Furniture Fiasco and his son being fired for poor performance by the City, then working on the Hickory Pipeline for handsome contract wages.

Citizens didn't get the results of the promised Furniture Fiasco investigation.  At the last Council meeting Councilman Alexander stated there were no results from the investigation into huge, seemingly illogical water bills.  The outcome of the Mayoral and City Council election will determine if these concerns are addressed or not.  It it's Mayor Morrison, City Manager Daniel Valenzuela and CFO Michael Dane have more research in store.

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