Austin Water - General Fund Transfers

[Michael Searle]

Councilmembers & Staff,

Agenda item #4 on the Public Utilities Committee is "discussion and possible action" regarding Austin Water's General Fund transfers. You can view the agenda here (http://austin.siretechnologies.com/sire ... ype=agenda)

Being that transfers to the General Fund from both Austin Water and Austin Energy impact customer bills, CM Troxclair was planning to bring a resolution to Austin Energy Oversight Committee that would give the Council an opportunity to discuss those transfers prior to the adopting rates and the Budget. Being that this item is posted for discussion and possible action tomorrow at the Public Utilities Committee, CM Troxclair would like to offer this resolution which is specific to Austin Water for the Committees consideration. The resolution asks the City Manager to prepare a report for Council with options for reducing and eliminating the General Fund transfer from Austin Water. CM Troxclair plans to bring a similar item to the Austin Energy Oversight Committee specific to Austin Energy's General Fund transfer.

Below is the language of the resolution. Thank you all for your consideration.

Best,

MS

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Whereas, Austin Water is a municipally-owned water utility and the second largest enterprise department in the City of Austin; and

Whereas, Austin Water’s total project revenue for FY 2015/16 is $548,807,215; and

Whereas, Austin Water has almost $2,500,000,000 in debt; and

Whereas, according to Fitch Ratings report (July 29, 2015) Austin Water’s “high” debt levels “escalated by 45% since fiscal year 2008” while debt service accounts for “43% of gross revenues, almost twice the median percentage for similarly rated systems;” and

Whereas, in 2014, Austin Water’s bond rating went from Stable to Negative partly due to increased debt and “narrow operating margins after making transfers to the city’s general fund;” and

Whereas, despite more than a 20% increase in population, since 2008 Austin Water has raised rates every year, resulting in a 61.6% increase in customer bills; and

Whereas, in order to improve the financial outlook of the utility, Austin Water anticipates annual rate increases in each of the next 5 years; and

Whereas, Fitch already considers Austin Water rates “high relative to income levels of city residents, and in comparison to other large urban systems;” and

Whereas, instead of increasing customer bills, Austin Water could decrease the amount of non-utility related expenditures; and

Whereas, in FY 2015/16 Austin Water will transfer a total of $42,804,534 of utility revenue to the General Fund and Economic Development Department; and

Whereas, those transfers, in total, cost the average customer $192 per year; and

Whereas, not only do those transfers contribute to rates charged by Austin Water but they compromise transparency in the cost of government and the services it provides; and

Whereas, because low-income residents pay a higher percentage of their income to utility bills, those transfers impact the affordability of Austin for those customers the most; and

Whereas, a nation-wide study by the American Public Power Association found that the median general fund transfer for municipally-owned utilities is 4%; and

Whereas, 4.0% of total revenues in Fiscal Year 2015/16 for Austin Water is $21,952,289; and

Whereas, in FY 2015/16 the total General Fund and Economic Development transfers for Austin Water is 95% higher than the national average for municipally-owned utilities; and

Whereas, lower water bills would attract businesses to Austin, help existing businesses and residents, and positively impact the affordability of Austin; NOW, THEREFORE,

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF AUSTIN:

The City Manager is directed to develop a report with options for both reducing and eliminating the General Fund and Economic Development transfers from Austin Water.

The report should include options for reducing the transfer to 4% and 6% of total revenues as well as options for eliminating it completely, both over a period time and immediately in the FY2016/17 budget.

The report shall be presented to the Public Utilities Committee no later than May 31th, 2016.

[Don Zimmerman]

CM Troxclair -
I would like to co-sponsor and second the motion to move this Resolution to the full Council with recommendation for passage.
Don

[Tina Cannon]

CM Troxclair,

CM Gallo is interested in co-sponsoring this resolution as well.

-TC