After a warning from the Texas Water Development Board, the Mission City Council adopted a policy Monday restricting transfers from the utility fund to the general fund.
The policy allows Mission to collect an “Administrative Fee” from the utility fund equal to 10 percent of the general fund budget.
Mission transferred more than $30 million from the utility fund to the general fund during the past decade, according to audit reports approved by the City Council.
The transfers moved cash from the utility fund, which supports water and sewer services, to the general fund, which supports a wider array of city services.
Mission started small.
In the 2008-2009 fiscal year, Mission transferred $1.5 million from the utility fund to the general fund, according to the annual audit report. In the 2017-2018 fiscal year, the city transferred $4.4 million.
The state Water Development Board, which provided nearly $25 million to Mission through the Economically Distressed Areas Program, flagged the transactions last year.
After reviewing the 2018 audit, the Water Development Board determined that Mission failed to follow regulations for grant recipients.
“Please submit a proposed detailed plan with an implementation timeline and responsible party under which the City would attain current compliance with the above-mentioned statutory requirement,” the Water Development Board wrote to Mission on Nov. 30. “Until the City can demonstrate compliance with the statutory provisions of TWC Section 16.356, we cannot consider the City for funding under any of our financing programs.”
The letter placed Mission in a bind. Substantially reducing the transfers could cause a budget crisis.
Mission proposed reducing the transfers until the amount reached 15 percent of the utility fund’s annual operating revenue, according to a draft City Council resolution Mission provided to Water Development Board administrators.
The resolution approved by the City Council on Monday included a different amount: 10 percent of the general fund budget.
Mission justified the amount by documenting the utility-related services provided by various departments.
“An analysis revealed that the value of the administrative services provided by the City of Mission to the Utility Department represent ten percent (10%) of the General Fund,” according to the resolution.
The City Council will incorporate that calculation into the fiscal year 2019-2020 budget.