A cash shortage may have forced Municipal Utilities to help bolster struggling city accounts over the last year, despite a vote by the council to stop raiding rate-payer funds.
This comes only two years after the council passed an increase in electric charges because the department's cash reserve had fallen to what officials considered critical levels. Advisory board members at the time blamed the low balance on a history of city officials dipping into the account.
The utility paid the city almost $1.3 million over the past two years to cover installments on a loan from Southern Bank, according to a review of Municipal Utility financial information.
Loan payments for the two years should have totalled only $1 million, at $500,000 per year.
Sources say the utility pre-paid, and over paid, on their loan expenses to help strengthen struggling city cash accounts, with a promise that the city would pick up later payments.
The utility is supposed to pay 58 percent of the annual bill. The city's capital account covers the remaining 42 percent, according to city manager Mark Massingham.
The debt was approved under fired city manager Heath Kaplan. It paid for citywide technology projects, as well as electric and water remote-read meters.
Payments were made from the utility to the city on Dec. 1, 2016, Feb. 24, 2017 and May 18, 2017. An additional $32,000 in interest payments were also made by the utility.
The Daily American Republic has not been able to confirm how much the city then paid to Southern Bank on the loan and how much debt remains. Messages sent Friday to Massingham seeking more information were not returned as of press time.
A utility budget was passed by the council in December, along with other city budgets. This includes a city general fund cash reserve that is now empty. The city has about $1.2 million remaining in a separate account from the sale of the city cable division.
Utility cash
The utility has made a steady climb toward what general manager Bill Bach has said would be a healthy cash balance since the electric rate increase, but this is expected to slow in 2018.
The electric department had a cash reserve of less than $3 million when an approximately 6.5 percent increase in monthly rates was put in place for most customers. Industrial customers were not included in the increase.
The department has set a cash reserve goal of $14 million, or a little more than one-third of the annual budget of nearly $40 million.
The unrestricted cash reserve was $10.9 million at the end of 2017, growing by approximately $1.1 million last year.
A 2018 budget for the utility predicts the department will be in the black less than $90,000. This is due to conservative budgeting and ongoing projects, Bach has said.
The council voted unanimously in September that all rates and fees collected by Municipal Utilities would be reserved solely for providing utility services. The vote came the same night the council also voted to seek $8 million in financing for a new city complex at Northwest Medical Center.
The utility vote had been discussed by the council and advisory board since 2014.
The city previously borrowed $3 million from the electric department cash reserve to create a cable division.
The cable division was sold in 2014 and all proceeds went into city accounts.
The utility also posted a loss of approximately $1.7 million when its building was sold as part of the cable sale. The utility then spent almost $130,000 installing a modular building as the temporary home for customer service and billing staff.
The utility is also repaying NewWave Communications almost $1.6 million for a contract mistake related to the cable sale. The payments come in the form of utility credits and city franchise fees paid over time.
City council members voted in 2016 to transfer $2.82 million to the utility department to repay past loans.