This is a little disturbing. Whenever an organization has to start borrowing, or even start shifting money around, just to meet payroll, there is a problem. What are they going to do the next pay cycle? Where will the money come from in July and August, to pay this back, when the city still has to operate? It's strange that they point out part of the cause of the cash flow problems is that, nearly half of the city's general fund revenues come from property taxes, most of which are collected betweenJanuary and May. This would make sense if it were say, December. It's a stupid argument now -- May was a month ago! They ran out already? Thoughts? http://www.chron.com/cs/CDA/story.hts/metropolitan/582911 June 19, 2000, 8:47PM Brown asks council to OK fund transfer By MATT SCHWARTZ -- Copyright 2000 Houston Chronicle Houston Mayor Lee Brown is asking the City Council this week to allow him to transfer up to $30 million in water and sewer fees to avoid running out of cash in the city's general fund. The city needs $32 million to meet payroll over the next two weeks; the general fund as of Monday contained $19.6 million. If approved, it would be the second time this fiscal year that the administration has borrowed from the so-called "Any Lawful Purpose" fund made up of excess water and sewer fees. But it would be the first time the mayor has asked the council to approve such a move. In doing so, the administration may avoid some of the criticisms that it endured last October when it borrowed $45 million from the fund without council approval. At that time, the administration relied on an opinion from City Attorney Anthony Hall that council approval was unnecessary because the transfer was a short-term loan, not an expenditure. Hall's opinion has not changed. With or without council approval, the administration has to do something about the amount of cash on hand in the city's tax- and fee-supported general fund. The Department of Finance and Administration and controller's office predict that the city could end the fiscal year June 30 as much as $20 million short. About $9 million of the $19.6 million in the general fund will be needed for the municipal payroll Friday. Next week's payroll, for police and firefighters, will be an estimated $23 million. The proposed loan was expected. The administration acknowledged the pending cash-flow problem three weeks ago, blaming it on lower-than-budgeted revenues and the timing with which monies flow into the general fund. For example, nearly half of the city's general fund revenues come from property taxes, most of which are collected between January and May. In a memorandum to the council last week, Brown said that he sought their approval on the transfer, even though he wasn't legally bound to do so. "My purpose in doing so, is to engage with my colleagues on City Council and work together on policy initiatives," Brown wrote. Apparently, it worked. Council members and City Controller Sylvia Garcia said they were pleased to see the transfer on the agenda. "We said all along that it needed to go to council for approval, and we're delighted that the mayor has agreed with us and put it on the agenda," Garcia said. While council members were pleased to get to vote on the transfer, several have questions and concerns about the practice. "I hate to see it (the ALP fund) just become the first source out of everyone's mouth when there is this type of major undertaking," Councilman Chris Bell said. "In certain instances it is justified. But you have to worry about the precedent." Councilman Mark Ellis agreed. That is why, he said, he has proposed an amendment to the mayor's $2.4 billion budget, which also is scheduled for a vote on Wednesday. The amendment would require the administration to gain council approval for any cash transfers between funds. Council's fiscal affairs committee voted down Ellis' amendment last week, but the full council could consider it on Wednesday. The Brown administration opposes it. Councilman Bruce Tatro, who has decried the city's use of water and sewer fees for unrelated projects, said he would support the proposed short-term loan but said it should be repaid to the utility accounts with interest. "This shows you that the general fund has no rainy-day balance available to it," Tatro said. "I think it shows you exactly how thin the operating budget is right now, for any contingency, a storm, any adverse event that puts a strain on current operations." According to the Department of Finance and Administration, the loan is to be paid back with general fund monies collected in July and August. In addition to the inter-fund loan, the budget and more than 20 amendments, the council on Wednesday also is expected to approve the issuance of $160 million in tax revenue anticipation notes. The city typically uses the tax anticipation notes to borrow enough money to meet its general fund obligations during the first several months of a new fiscal year. Fiscal 2001 begins July 1. ------------------ Stay Cool...
