Oak Creek enterprise fund transfer plan done in other towns

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— Marsha Willhite, town administrator for Holly, said the town of about 800 people four miles from the state’s southeast border with Kansas always struggles with its general fund.

“We only have a 1 percent sales tax,” Willhite said, adding that money from Prowers County is scarce and that there is a question on the November ballot to bump the town’s sales tax to 3 percent.

Similar to Oak Creek in Northwest Colorado, Holly manages its water, sewer and electric utilities through a proprietary fund. And like Holly, Oak Creek plans to move funds from its utilities to its general fund.

When Holly’s general fund struggles, Willhite said, the water and electric utilities contribute to a transfer from the proprietary fund to the general fund.

Willhite said the transfer is budgeted for annually at about 10 percent of the utilities’ revenue but is done in monthly installments. If the general fund doesn’t need all of what is budgeted, not as much is transferred, she said.

The town of Oak Creek has decided to charge its enterprise funds, which are a form of proprietary funds, management fees that are paid into the town’s general fund.

Because the enterprise funds are supported by utility fees, the funds are exempt from TABOR.

In a 2008 ruling Barber v. Ritter, the Colorado Supreme Court held that enterprise transfers did not constitute a tax increase.

The city of Steamboat Springs charges its enterprise funds overhead, which is transferred back to the general fund. The 2012 city budget summary lists the waste water fund’s overhead at $374,109 of $4,475,849 in total expenditures. The water fund’s overhead is listed at $168,507 of $7,912,739 in total expenditures.

Oak Creek Town Administrator Mary Alice Page-Allen said the town’s funds being assessed a management fee is like paying the profit from the utilities back to the shareholders of the town: its residents.

The proposed 2013 budget lists the electric utility’s fee at $106,155 of $748,069 total expenditures. The electric fund is projected to have a total revenue of $763,695.

The water fund’s management fee is listed as $17,900. The proposed budget estimates $773,100 in revenue and $781,335 in expenditures for the fund.

The sewer fund’s management fee is listed as $50,250. The proposed budget estimates $336,870 in revenue and $293,234 in expenditures.

Nancy Stahoviak — who has served as a Town Board member, mayor and town treasurer — said transfers from utility funds to the general fund have occurred in the past, mainly from the electric fund.

The transfers were not assessed as a fee and were budgeted annually as a lump sum, Stahoviak said.

Stahoviak said the premise of the fees was that there were certain expenses that were not always recognized in the utility budgets.

To reach Michael Schrantz, call 970-871-4206 or email mschrantz@SteamboatToday.com

Comments

Scott Wedel 2 years, 2 months ago

So they found one other city in Colorado transferring large sums of money from their utilities funds into the general fund.

So did the reporter ask about other cities that have electric utilities? I had a nice conversation with an official in Boulder's finance dept whom was quite surprised that any town's residents would allow their town government to have an open checkbook covered by the town's utility rates. The Aspen City official was adamant that their city utilities are operated for the benefit of their customers and not to subsidize their general fund.

Colorado Springs Utilities Policy Advisory Committee has a nice research paper discussing the advantages of having municipal utilities managed by a board independent of the city council because, among other things, it removes city politics from the operation of the utilities and allows the utilities to focus on their customers.

Just because it is not illegal and another town is taking not as much (at least in percentage of revenues) does not make it a good idea for Oak Creek to take as much as they wish from the utility funds. And then increase rates as needed to cover the transfers.

And at least my criticism is that if it looks like a tax and acts like a tax then like a tax it should (not legally required) be approved by the voters.

The argument that these are excess funds is obviously false when the water and sewer utilities have massive infrastructure issues running into the millions to be brought up to par. The trash rates are projected to increase to create the "excess funds" to be transferred to the general fund.

This was supposed to be a fair and balanced article? Only quoting those that support the proposal? Didn't try talking to me after I broke the issue in my letter to the editor. Didn't talk to recent former Mayor Jay Elliot whom did huge work on cleaning up the town's budgets.

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Scott Wedel 2 years, 2 months ago

And FYI, these transfers from the utilities is greater than sales and property tax combined, but Town Board does not think this is worthy of voter approval.

These transfers allow Town of Oak Creek, during a time of declining sales and property tax revenues, to increase general fund spending by 50%.

There is nothing stopping Town Board from deciding these transfers make budgeting so much easier and increasing the transfers next year.

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max huppert 2 years, 2 months ago

Why cant they deal with the money they have and stop wasting and thinking they know what is best for everyone. This Mayor is a joke. no idea how to run a little town. Get the paperwork together Scott, maybe we can stop this.

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