Accountant: No water bond needed
A handful of Redlanders have recently sent letters to City Hall protesting a possible city bond issue that would raise $17 million to allow the city-owned water utility to purchase water rights that are already owned by the city.
City Manager N. Enrique Martinez has put forth the bond as a possible solution to what he has described as a decades-old accounting problem. In 1926, the city authorized bonds to purchase Mill Creek water rights. According to City Hall, there is no record that the water utility, which has its own budget, ever repaid the general fund for those water rights.
However, Jay Zercher, an accountant with Rogers, Anderson, Malody & Scott LLP, wrote a letter to the city in which he posits a far simpler solution.
"All that needs to be done is merely transfer the water rights to the water department by making an accounting entry first in the Governmental General Fund recording the transfer out of water rights at historic cost of $525,000. The second entry would be made in the Water Department which would record the receipt of the $525,000 water rights at historic cost," Zercher wrote in the Jan. 28 letter.
Zercher said Redlands' situation is like a homeowner who finds a cookbook in the living room. He wrote that such a homeowner would solve the problem by placing the cookbook in its right place in the kitchen.
Thus, in Zercher's argument, the city can simply transfer the water rights to the proper department. No fuss, no muss.
However, if the water department were to issue $17 million via bonds, likely necessitating a water rate hike to pay for those bonds, that money would go to the general fund. Martinez has proposed placing $1.5 million in reserves, using an equivalent amount to pay for street repairs and use the remaining $14 million to establish an endowment fund that would generate interest to be used for street repairs.
The possibility of water payments being used to fund general fund operations has raised concerns that the Redlands officials are contemplating financial moves that would essentially amount to taxation, although the public wouldn't get a chance to ratify the tax at the ballot box.
Earlier this month, the council voted 3-2 to hire consultants to study the situation. Mayor Jon Harrison,and council members Pete Aguilar and Pat Gilbreath voted to for the consulting contracts. Councilmen Jerry Bean and Mick Gallagher voted against the idea.
In a telephone conversation Wednesday, Zercher said his letter speaks for itself.
Martinez did not respond to an e-mail seeking comment.
Comments
Seems to me that all these machinations miss the point: Redlands needs money.
Why Our Fair City needs money is something else again.
You don't need an accountant to tell you that assets that were arbitrarily placed in the wrong bookkeeping slot should be reassigned (along with copious footnotes explaining why, so that reading from one year's records to the next is clearcut).
Perhaps the first order of business should be to look at all the City assets and see what other mistakes could plague the future. (Remember that in recent years Redlands moved Hillside Cemetery into the water department, and the airport into the solid waste division. There are no footnotes justifying these reassignments. Perhaps the RAMS accountant can opine on these moves.) Once the books are 'cleaned up', either past statements should be refiled, or footnotes be added. - And then NO MORE! -
Redlands has accounting problems, but its bigger problem is lack of spending discipline.
With the current passive majority on Council, the solution is looking more and more to be a recall petition.
Posted by: Charlie Trie | January 31, 2008 8:38 PM