BOMBSHELL REVELATION: CoMo city utility had no policy to deal with financial emergencies

Another loosey-goosey financial practice.  Part 3 in a series 

COLUMBIA, Mo 2/2/14 (Beat Byte) -- Even with over $80 million in "unrestricted" cash on hand, Columbia's mammoth Water and Light Utility had no policy to deal with unforeseen expenses and financial emergencies until December.

Water and Light director Tad Johnsen dropped the budgetary bombshell during a Dec. 16 hearing to set aside 20% of the utility's annual expenses as a reserve fund to deal with the unexpected. 

City Council members voted to create the fund after the hearing.

"What current policy do we have regarding maintaining reserves in this account -- or is there no current policy at all?"  4th Ward Councilman Ian Thomas asked.

"We don't really have one," Johnsen replied.   "That's one of the tools we want, to give an accurate account of where we are in the budgeting process.   This has really been recommended as a valuable tool for our bond rating." 

Reserve funds are a government accounting standard and frequent political issue.   Columbia Public Schools' reserve fund, for instance, has been a campaign centerpiece many times.

The new water and light reserve policy explains the fund is needed to cover revenue shortfalls; service restoration due to weather or natural disasters; unfunded mandates; and to maintain good credit with agencies that issue debt for new infrastructure.   

The lack of a reserve fund at the city utility -- set to bill consumers over $150 million this year -- is further evidence of "loosey-goosey" accounting practices that financial statements indicate have violated the City Charter for decades. 

Columbia's guiding constitution, the Charter mandates that surplus funds (i.e. profits) from the Water and Light Utility be either a) deposited into the General Fund, which pays for police, fire, and other basic city services; or b) returned to rate payers in the form of lower future water and electric rates. 

But 10 years of Comprehensive Annual Financial Statements (CAFR) show City Hall has never made the required profit-sharing transfers, instead raising utility rates and starving the General Fund.    

The new water and light reserve policy only tackles part of the issue.   After the 20% reserve is met -- estimated at $37 million for 2014 -- the utility would still need to return $43,505,525.00 to ratepayers or the General Fund, along with profits from future years, to comply with the Charter mandate.

"There are some stipulations in the Charter about water and light funds," Third Ward Councilman Karl Skala said, referring to the profit-sharing mandate during the Dec. 16 hearing.  Skala said he will "ask for a report on the issue later."

"I do know the Charter is restrictive on what water and light funds can be used for," Johnsen replied, without further comment.

Parts 1 and 2 of our series on utility funds and the City Charter

 

CITY CHARTER VIOLATION, Part 1? Is City Hall misappropriating water and light utility funds?

COPS, FIREFIGHTERS, RATEPAYERS: Must share utility profits, CoMo City Charter says