Proposal would hike city departments’ administrative costs by $10 million

City of Austin departments would take on nearly $10 million in new support appropriations charges under the proposed FY2014 budget year. That figure – the one assessed by staff to other city departments to account for their share of administrative costs – includes charges for a host of administrative functions, including corporate Human Resources, Building Services, and the office of City Manager Marc Ott.

 

The increases could pose trouble for a host of reasons, not the least of which is tied to the ongoing debate over what city operations should be paid for by Austin Energy.

 

According to figures released to Council members in the wake of a budget question from Council Member Bill Spelman, support allocation will grow by a collective 11 percent. That figure includes relatively sharp rises for some departments, along with some decreases for others.

 

Austin Energy is among the city departments that would see an increase. If approved by Council, the utility’s contribution to support services would rise by 14 percent. Though not the highest percentage (the Aviation Department will see an increase of 19 percent), the Austin Energy contribution represents the single largest dollar increase in support appropriations. The percentage figure is among the four top numbers.

 

The news comes as Council members continue to grapple with the FY2014 budget. It also drops against an In Fact Daily report that Management Services has grown in terms of budget by just under $6 million since FY2011, and full time employee equivalents by just short of 50.

 

Though one source in the In Fact Daily report defended that growth as necessary, Spelman has questioned whether it is all completely necessary. (See In Fact Daily, August 12.)

 

Austin Energy’s contribution poses a special problem for Council members. As part of the just-settled 2012 rate case, Public Utility Commission expert Ruth Stark was deeply critical of the way that staff assesses support charges for the utility.

 

In direct testimony, Stark wrote that she examined support costs from FY07 through FY2012. “The changes in allocations to AE are not consistent with changes in the COA overall cost pool,” she noted. “For example, between FY07 and FY08, there was a zero percent change in overall costs, but AE’s allocated amount went up 3.62 percent. Between FY08 and FY09 the overall costs went up by 19.68 percent while AE’s share increased by only 11.56 percent.”

 

Stark continued: “When the city’s total pool of costs went down (emphasis hers) between FY09 and FY10 by -4.11 percent, Austin Energy’s allocation actually increased by 1.73 percent.”

 

Stark also concluded that the percentage of each service that Austin Energy is responsible for was inconsistent. “AE allocated almost 50 percent of some services…and almost 40 percent of others,” she wrote.

 

As part of her recommendation to the PUC, Stark suggested that the utility separate its support service allocation costs into another individual transfer. She reduced the level of the transfer from nearly $15 million to just over $11 million.

 

This portion of Stark’s calculation was not included in the settlement of the rate case. Since FY2010, Austin Energy’s contribution to Administrative Support has risen from $15.1 million to a proposed $21 million in FY2014. It represents the single largest dollar figure outside of contributions from the city’s general fund in that regard.

 

Critics of the allocation have suggested that it illustrates the city’s use of Austin Energy as a cash cow to cover other city fiscal needs.

 

In a response to Spelman, staff concluded that support service growth accounts for 19.5 new full time employee equivalents, a one-time accounting change with regard to custodial services, and assorted other issues.

 

“It is important to note,” says the staff response, “that while total contributions are increasing by 11 percent, individual charges will vary based on the values of the metrics used in the allocation computation. As the underlying metrics shift – such as total department budget, number of purchasing documents processed, or number of hours worked – shift, so does the specific amount charged to that fund.”

 

Council’s budget discussion continues with work session this morning.