The City of Tacoma has reimbursed $2.4 million to Tacoma Public Utilities and other city entities for misusing restricted reserve funds three years ago to help balance the city’s general fund budget, the city’s finance director said Tuesday.
“We took care of it today,” Finance Director Bob Biles said.
With interest, the city’s repayments include $1.3 million to TPU, $502,00 to General Goverment utilities and about $660,000 to other city entities. The repayments will come out of the general fund’s rainy day cash balances and won’t affect the current year’s budget shortfall of about $11 million, city officials said.
Biles said the city’s misuse of utility ratepayer and other restricted funds that were contributed into a collective Internal Service Fund in 2009 was a mistake made due to misinterpretation of a state law.
“We understood that under one RCW that it was permissible to make those transfers,” he said. “We found out in January that it was not.”
As we reported a month ago, TPU officials raised questions to the city about the fund transfers in January, after a TPU staff member discovered them.
TPU Director Bill Gaines said the city had “swept” excess monies from the fund – an account into which the city, TPU, general government utilities and other entities contributed payments for shared overhead and administrative costs. Biles said today the money was used to help balance its financially-strapped General Fund in 2009-2010.
State law generally prohibits municipalities from shifting costs of general government services to utility ratepayers, and Tacoma’s City Charter states that utility revenues “shall never be used for any purposes other than” those related to utilities. Many TPU customers live outside Tacoma and don’t use other city services.
Biles said today city officials believed the transfers were permissible under a section in state law that allows funds to be re-appropriated. But, after TPU raised questions, the city realized that the transfers weren’t permitted under the state law requiring “all unexpended balances of appropriations shall be transferred to the fund from which appropriated…”
With the repayments coming from the general fund’s existing cash balances, that rainy day reserve fund fell to about 2.9 percent of overall budget expenditures — below the 5 to 15 percent policy goal set for the reserve fund’s minimum.
But Biles has said that, with an infusion of expected property tax revenues due to the city at the end of April, those cash balances will soon be bolstered.
Councilman Jake Fey said today the cash balance is “still very low.”
“It’s not where you want to be,” he said. “It’s just a couple weeks’ worth of money, if a catastrophe happens.”
The council has been re-examining the city’s policy for the allowable minimum for such cash-on-hand reserves, Fey noted.
“We have to redo our whole policy about how much cash we have to have on hand,” he said. ”The current (5 to 15 percent minimum) policy isn’t specific enough. It’s an average for the year. That’s not the purpose of the fund. The purpose is to provide a cushion in case things get worse.”