Even though City Council froze the transfer from Austin Energy to the city’s general fund at $105 million in 2012, the amount the utility pays for support services has continued to grow. For the current fiscal year, the utility will fund more than $20 million for support services as well as to departments that may or may not have much to do with the utility.
The transfer, of course, is like a dividend payment to the taxpayers, reducing the amount they would have to pay to fund the city. It is used to defray costs and reduce taxes. The city uses various methods to allocate administrative costs, some of them intuitively obvious, but others not.
On Friday, Austin Energy General Manager Larry Weis sent a memo to Mayor Steve Adler and Council members delineating the transfers from Austin Energy to the city in detail. Council requested the information at the end of its policy briefing March 2. The topic will no doubt be part of the discussion at its March 26 meeting devoted exclusively to Austin Energy.
According to calculations by Austin Energy staff, the amount the utility has paid into the general fund has grown by 30 percent over the past 10 years. That number includes the general fund transfer. In 2006, Austin Energy paid $118,904,000 into the general fund, including the transfer. That number has grown to $154,972,000 for the current fiscal year. It is projected to grow to $158,806,000 in FY2016.
After looking at the numbers, consumer advocate Paul Robbins said, “Basically, the less Austin Energy pays in administrative charges for the general fund, the less our rates will be. And if the rate allocation formula is readjusted, we might be able to avoid a new rate case or mitigate the one that will come up in the near future.”
According to the memo, Austin Energy pays for 44.7 percent of the budget for the mayor and Council, or $1,271,796 of the total budget of $2,844,908.
Austin Energy also pays $1,605,767 as its share of funding for the Budget Office. In addition, the utility pays for 44.7 percent of the budget of $1.2 million for the Communications and Public Information Department, despite the fact that Austin Energy has its own Public Information Office.
Shudde Fath, who has served on the city’s Electric Utility Commission since it was created in 1977, said she and other members of the EUC have been trying to get the Austin Energy allocation revised for many years.
“And because it benefits everybody except Austin Energy, it never happens,” Fath said. “I can’t even remember a Council member taking an interest in it. It’s like they don’t want to know this. They have to look at the formula and key in on some logical parameters for the allocation. This new Council has a golden opportunity to fix it.”
The city has different methods of allocating what it charges to each department for services such as the City Auditor’s Office, the City Clerk’s Office, the Law Department, the 311 Call Center and vehicle fuel and maintenance.
For example, the utility pays 44.7 percent of certain expenses of the City Auditor’s Office. Under that calculation, Austin Energy pays $1,009,000. Under a different allocation that computes the number of hours of auditor time each department uses, Austin Energy pays only 25.88 percent, or about $263,000. But, of course, the utility pays both charges.
When figuring the charges for payments to the Contract Management Department, 60 percent are allocated based on the total number of contracts each department has and 40 percent are allocated by the dollar value of the contracts, according to the memo.
The City Auditor’s Office audited the transfers from the enterprise funds to the general budget last summer.
According to the report, “The Budget Office has established cost allocation plans for the Support Services spent and the Communication and Technology Management Fund. However, improvements are needed to address allocation errors and to fully document the CTM cost allocation plan. Lack of sufficient controls resulted in incorrect allocation of costs to Austin Energy and Austin Water Utility. Additionally, the process of interdepartmental reimbursements does not include procedures to provide documentation to justify the cost of service.”
Photo by Sue Jones [CC BY-SA 2.0], via Wikimedia Commons
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Austin Energy: As a municipally-owned electric utility, Austin Energy is a rarity in the largely deregulated State of Texas. It's annual budget clocks in at over $1 billion. The utility's annual direct transfer of a Council-determined percentage of its revenues offers the city a notable revenue stream.
budget: Income and expenditure for a set period of time.
