Red Words

City Manager N. Enrique Martinez has sent a letter to the City Council and Redlands department heads outlining how he would use $17 million that could be raised through a possible bond issue.

A full article on the subject is scheduled to run in The Sun on Thursday. The most interesting aspect of Martinez's memo is that he explained how he would use interest generated from a $14-million endowment that would be created using bond revenues. That money, Martinez wrote, would be used to pay for street, curb and sidewalk repairs.

Martinez said none of the money would be spent on payroll. Of the remaining dollars, $1.5 million would go to budget reserves and the other half would go to street repairs.

The bond, as Martinez has proposed, would allow the city's water utility to purchase Mill Creek water rights that are already owed by the city. Those water rights were acquired with revenues raised through bond issue that was authorized back in 1926.

Martinez has said the water utility never properly paid for those water rights. Taxpayer dollars paid off the 1926 bonds, and Redlands' water utility is not supposed to be funded by taxes. The water utility has a separate account, which in government parlance is called an "enterprise fund." Water customers - who are often, but not always, Redlanders - pay for the water utility's operations when they pay off their water bills.

The city manager has taken the position that taxpayers have improperly subsidized the water utility for decades, thus creating a serious accounting problem that needs to be squared away.

"People seem to think that because it happened 80 years ago, you shouldn't do anything about it. Accounting procedures are not made by me or that guy on the street," he said.

The possible $17-million bond would allow the water utility to purchase the water rights from the city. It would also give the general fund a cash infusion. Redlands has a balanced budget for the current fiscal year, but officials have spoken of possible budget shortfalls during the budget year that begins July 1.

Under Martinez's plan, water customers' payments would effectively help finance general fund operations. This has raised concern that higher water rates would essentially be a tax in all but name.

On Jan. 15, the City Council approved contracts with consulting firms to examine the city's water rates and possible bond issue. Bond discussions have also prompted concerns that a hefty water rate hike could be in the works. The city has already upped water rates by 7 percent this year after an equivalent rate hike last year.

The council voted 3-2 to approve the contracts. Councilmen Jerry Bean and Mick Gallagher have already taken positions against the city manager's plans, whereas Mayor Jon Harrison and council members Pete Aguilar and Pat Gilbreath wanted to receive expert opinions on the issue.

"I still feel it's something that warrants investigation," Harrison said Wednesday.

So far, the council doesn't seem to be terribly enthusiastic about the possible bond issue. The council trio who voted for the consulting contracts want more information, but have not made comments in public nor in interviews that suggest they are fired up to issue bonds in order to fix a reported accounting error.

"The rationale makes sense from a business perspective but we still have to look at it from a community perspective," Harrison said.

When the council decided to go forward with the consulting deals