*Note: “Departments” as used in this article should be read as shorthand for “departments, divisions, and offices.”*
Take a look at this budget from DeKalb’s Finance Division:
Seems pretty straightforward, right? Well, it’s not. It does not show all the wages the Finance employees get paid. This is a budget that accounts only for the wages coming from the General Fund (the city’s chief operating fund). Finance staff also get paid portions of their wages from the Water Fund.
Total full- and part-time wages this year for Finance people are projected to come to $157,000 more than this Finance budget shows. Likewise, the Water Fund provides part of the compensation for the city manager’s office, Building & Code, HR, IT — even the city council.
The details
Below is a report of the portions of salaries charged directly to the Water Fund this year. As with the TIF transfers discussed previously, each employee’s position is assessed a percentage of salary to charge the Water Fund, supposedly based on the amount of support the position is deemed to provide to Water operations.
I obtained reports of these charges for the last four years using the Freedom of Information Act. Because I found some of the Public Works positions confusing as to which are inside and which outside of the Utilities (formerly Water) Division, I also checked with the assistant city manager about how much charged to Water goes to other departments. He said this year it’s about $370,000 in total, which represents more than 27% of the $1.35 million in full- and part-time wages budgeted in the Water Fund.
There is also an annual lump sum transfer from Water Fund to General Fund, called a PILOT, or “payment in lieu of taxes,” which is currently $311,000. In all, this year the city is planning to take $681,000 from the Water Fund for general operating purposes outside the Utilities Division.
History of Water Fund transfers
In a parallel practice to the TIF transfers examined during the recently released forensic assessment, DeKalb has made annual transfers from Water Fund to General Fund for years, ostensibly to cover expenses arising from other departments that support Water-related operations. For example, billing clerks and customer service representatives deal with water bills but belong to the Finance Division. The Water transfers were supposed to cover that.
From fiscal 2006 through 2013, the annual transfer ranged from $500,000 to $550,000. It was never reduced under the $500,000 level even when this delayed important maintenance projects such as repainting water towers.
In fiscal 2014 the lump-sum transfer jumped to $650,000 and in fiscal 2015 to $702,518, in accompaniment to the hiring spree going on at that time. Then in fiscal 2016, the transfer dropped to $258,965. This did not reflect an impulse to economize, but rather a change in policy to charge the Water Fund directly for salaries to other departments, essentially disappearing the transfers into Water Fund line items.
There’s no way to know by looking at the budget that $370,000 from the Water Fund pays salaries in other departments, and there’s no way to track changes in this number without digging.
Implications of salaries charged against Water
The city must find a way to present the extent of the Water Fund involvement in departmental budgets so the public is not unknowingly viewing skewed information. Meaningful public participation in the budget process depends on it.
Transfers and charges themselves also pose a detriment to one of DeKalb’s better plans. In 2015, the city adopted a capital plan that included yearly water rate hikes of 4.5% per year for 5 years, with 3% of the increases going into a new Water Capital Fund. DeKalb has been struggling to make the promised transfers. Part of the problem is water sales have been declining, but of course we also need to acknowledge and look critically at DeKalb’s outsized dependence on the Water Fund for purposes outside Water.
And, finally, since there seems to be general agreement that the size of the TIF transfers as calculated were at best inappropriate, it’s only common sense to scrutinize this set of interdepartmental transactions the same way.
Related: DeKalb’s $10 million budget hole