ITID Board Moves $1.3 Million To Cover Park Contract Shortfall

The Indian Trail Improvement District Board of Supervisors on Wednesday, May 29 approved the transfer of almost $1.3 million from its utility sale fund to the general fund to cover a shortfall in the cost of finishing the Acreage Community Park southern expansion project.

ITID Attorney Mary Viator said legal staff had requested a public hearing to consider a budget amendment for fiscal year 2018-19 to transfer funds, although there was no public comment made at the meeting.

“The issue is dealing with the transfer of a fund balance restricted for maintenance, which is basically the reserves, to capital outlay for park improvements,” she said. “We need to conduct a public hearing because the proposed expenditures would constitute a material expenditure, and that’s something that’s unique to the Indian Trail Improvement District with this type of provision, in that the district’s budgets are adopted by specific district functions.”

Viator explained that the district’s expenditures are by categories: personal services, operating expenses, capital outlay, debt service and other uses.

“When an object of expenditure exceeds 10 percent of the budget, it must be amended by the board after a public hearing has been held,” Viator said, explaining that there would be a request later to approve a resolution to reclassify $1,293,147 for maintenance expenditures out of the district’s utility sale fund and into normally budgeted maintenance.

“This action will [make] additional utility sale funds available for the current park project,” Viator said. “Once we have those funds reclassified, we would then subsequently have an amendment to the 2019 budget to fund the park project. This will include the amounts spent on the park in fiscal year 2019 and will add the additional $1,293,147 budget for the park.”

Viator said there was a comment in the district’s recent audit that there needs to be a specific provision in the budget for park improvements. “What we would basically be doing is approving the budget amendment in the final amount of $1,760,225,” Viator said. “That includes the $267,078, which are the proceeds of the utility funds at the start of the fiscal year, $200,000 that was received from grant monies, as well as the reclassification of these expenditures for the $1,293,147.”

Viator explained that in fiscal year 2008, ITID agreed to exchange its right to provide utility services for money from the county, which became known as the utility sale.

“Since those monies were not maintenance assessments, the utility sale maintenance monies could be used to acquire new and additional assets and improvements within the district without being subject to a water control plan,” Viator said. “Since 2008, it has been used to acquire new assets, as well as to pay for maintenance to existing assets and operations. The proposed resolution reclassifies these maintenance expenditures to charge regularly budgeted accounts rather than the utility sale. Residual amounts from prior fiscal years are now classified as fund balance restricted for maintenance, or more commonly known as the reserves. Therefore, this reclassification moves the charges from utility sale monies to reserves and effectively increases the amount of the available utility sale monies, which could then be used for new improvements.”

ITID President Betty Argue said the board would not have had to take this action if the utility sale account had been managed more carefully.

“Since I got on the board in December 2016, I started reviewing that account, and in January, I started sounding the alarm that there were representations made that were not quite factual,” she said. “This would not have been necessary if it weren’t for the commitments that were made by the previous board, and we have a current contract that we have to cover the cost of. So, it was either take a look at where the funds were spent and reallocate, or budget it in the budget, and it ultimately ended up being the same difference.”

Argue said staff went through an in-depth review back to 2012 to review how those funds were spent.

“The other thing that’s important to note is that there was a representation made that there was $1.1 million in grant funds, which there actually never was $1.1 million in grant funds for that park contract. Needless to say, there was a shortfall always in the amount when the commitment was made for that contract,” Argue said. “This gets us to completion and satisfies what we need to do.”

Argue added that there is no certainty of how the reserve fund would be affected.

“My understanding is that it’s not going to affect it that much, but it will be a board decision in terms of the impact on the 2019-20 budget,” Argue said. “We have a policy that says that we want our reserves to be 25 percent, but if it’s slightly below that, we can also say that we waive that requirement, so that’s a decision we’re going to have to make on a separate issue.”

Supervisor Tim Sayre said he was concerned that utility sale money appears to have been misspent, including $900,000 that was spent from April 2012 to September 2012.

“I don’t have a problem moving the money in the budget itself,” he said. “I have a problem going back against units that are suddenly going to start being assessed for something that happened six, seven or eight years ago.”

Argue said it was Sayre’s option to bring matters to the board that he feels are inequitable.

“I think every one of us would be prepared to review that and take a look at how to address it,” Argue said. “This was a specific situation because we have to get through this park contract.”

Sayre said he was not against finishing the park project and eventually made a motion to approve a resolution reclassifying the expenditures, which carried 5-0.

Supervisor Joni Martin made a motion to approve a resolution adopting the budget amendment, which also carried 5-0.