A Possible Breakthrough for the City’s $14 Million Budget Surplus

By Bill Oakey – April 7, 2014

In the middle of the night, an idea came to me for the $14 million budget surplus…Transfer it to the Water Utility to help cover their severe revenue losses.This could help the City in several ways:

1. Protect ratepayers from high rate increases as an ironic “punishment” for water conservation.

2. Sustain or hopefully improve the Water Utility’s AA- bond rating from Fitch Rating Service.

Consider this quote from the Fitch Bond Rating Service dated June 3, 2013:

“INCREMENTAL DECLINE IN RATE AFFORDABILITY: The city’s water and electric utilities maintain autonomous rate-setting authority. However, AWU’s combined rates are somewhat high relative to income levels, and moderately-sized planned rate increases needed to boost financial performance could ultimately lead to rate fatigue.”

And this quote, especially the last clause in the last sentence:

RATING SENSITIVITY

“IMPROVED FINANCIAL METRICS: The continuation of AWU’s efforts to steadily improve its financial metrics will be critical to maintaining the current rating. Fitch considers AWU’s stated financial targets to be positive, particularly the improved reserve levels, and any deviation in achieving its financial forecast over the next few years will result in downward rating action.”

Here is a link to the full Fitch rating statement:

http://www.businesswire.com/news/home/20130613005835/en/Fitch-Rates-Austins-TX-611MM-Water-Wastewater#.U0KQrSe9KK0

The question now is whether transferring the money from the City’s General Fund to the Water Utility is doable.  It is perfectly legal to go the other way.  When the utility makes a profit, they routinely transfer part of it to the General Fund, just like Austin Energy does.

Stay tuned for updates on this important affordability development…

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