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Council looking carefully at possible cuts to FY2014 budget

Thursday, September 5, 2013 by Michael Kanin

A portion of city staff’s latest budget pitch to Council members could result in rate increases for Austin Water Utility customers. The staff proposals are designed to help the Council cut some $7 million from the proposed FY2014 General Fund  budget, allowing Council more flexibility in adding funds to some programs or lowering the tax rate.


At issue is a suggestion from city budget staff that would undo changes made to the city’s Sustainability Fund, as well as redirecting $1.3 million worth of funding for the Economic Development Department back to the city’s General Fund.


If Council decides to do that, they must then decide whether to simply cut those expenses or take the money from one of the city’s enterprise departments – including the Austin Water Utility, Austin Resource Recovery or Austin Energy.


In the presentation, delivered Tuesday as part of their revamp of the FY2014 budget proposal, staff noted that some of the proposed changes to the document “would impact enterprise departments.”


“That’s something that we’d have to work through,” said the city’s Deputy Chief Financial Officer Ed Van Eenoo. “What would those impacts be to those enterprise departments? Would those enterprise departments have to increase their rates in order to cover the additional cost?”


Water Utility Chief Financial Officer David Anders told In Fact Daily Wednesday that the Sustainability Fund reversal would result in a rate increase of 0.3 percent. Anders called the potential rate bump “minor,” and noted that, though the hike would affect all rate classes, the utility had yet to figure out bottom line costs associated with it.


It is unclear whether these changes would affect Austin Energy but any attempt to take additional funds from the power utility would run counter to concerns raised by Public Utility Commission staff during last year’s Austin Energy rate case.


AE General Manager Larry Weis told In Fact Daily that he had no comment on the matter.


During deliberations last year associated with the Austin Energy rate case, the PUC’s Director of Financial Review hammered the city for its practice of funding Austin’s Economic Growth and Redevelopment Services Office (as it was then called) via Austin Energy. In her testimony, Ruth Stark wrote that the utility’s funding of EGRSO and the city’s office of small and minority business resources was “not reasonable and necessary for the provision of electric service.” (See In Fact Daily, Feb. 13.)


Mayor Lee Leffingwell said that he is in favor of simply eliminating the contributions to economic development and the efforts serviced by the Sustainability Fund. “My opinion is just eliminate the General Fund contribution (to Economic Development) if they can sustain that,” he told In Fact Daily. “Same thing with the Sustainability Fund. I would like to know that it wouldn’t have a substantial effect on their ability to do what they do. I thought I was told no (at the work session) yesterday.”


Mayor Pro Tem Sheryl Cole told In Fact Daily Wednesday afternoon that she would not support either of staff’s proposals to reverse economic development or sustainability fund dollars back to utility funding.


Council Member Laura Morrison said she thinks there has to be a better way for Council to accomplish its goal.


“I agree it does not make any sense to just move substantial amounts of revenue from property taxes to fees to address our budget. There are options we need to consider,” she said. “The General Fund is already transferring $17 million to the economic incentives reserve fund to support previous economic development agreements for tax abatements, so I am supportive of decreasing the amount the general fund contributes to economic development beyond that, as staff has proposed. We should explore the impacts of not replacing those funds and working with smaller amounts overall in economic development.”


Council Member Kathie Tovo said staff’s proposals were worth consideration. “I believe it’s very appropriate to consider the proposed shifts that staff offered as options at yesterday’s work session,” she said. “In this year’s budget and last, staff had proposed changes to the Sustainability Fund, and these changes have placed pressure on the General Fund. I believe it’s appropriate to reconsider those changes — or at least the speed with which we achieve those funding shifts.”


One of staff’s proposals was to cut the General Fund contribution to the 311 call center from $1.5 million to $1 million. Austin Energy has traditionally paid the lion’s share of funding the call center.


Council Member Bill Spelman suggested that a proposal to cut half a million dollars from the contribution the General Fund makes to the 311 call center would end up on Austin Energy’s tab. He said he has “serious reservations” about the proposal. “If we have good evidence that the appropriate charge to the General Fund ought to be $1.5 million…it seems best we charge $1.5 million,” he said.


Just before Tuesday’s budget presentation, City Manager Marc Ott made a point to tell Council members that the changes pitched by staff were the result of a reconfiguration effort undertaken after feedback from Council members and the community. “There are…priorities, things that we’ve heard that are important to Council that may not be reflected in the recommendation as presented to you from your collective perspective as well as from what you’ve heard from the folks who’ve come to give testimony during the public hearings,” Ott said.


“With that in mind, we have gone back and looked at the budget, and really tried to create some pathways, or some capacity by which you may be inclined to address some of the things that we have heard you talk about in the course of your discourse regarding the proposed budget for ’13 and ’14.”


Also Tuesday, Leffingwell told In Fact Daily as well as a host of other local media outlets that he would not support a property tax rate above the nominal level. The nominal level would retain the city’s FY2013 tax rate.


To achieve that, Leffingwell said that city budget writers would have to find roughly $7 million. Tuesday’s staff presentation included $4 million in new revenue as well as $11 million in proposed cuts for a total of $15 million to lower the property tax rate. The reversal of Sustainability Fund and Economic Development dollars each represent $1.3 million of the $11 million in cuts, respectively.


Council members are set to ratify the budget and set the property tax rate over three meetings on Monday, Tuesday, and Wednesday of next week. More budget amendments are expected.

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