Utility transfers to the general fund: What is reasonable, fair, and legal?

摘要

Utility transfers to the local government's general fund can represent a substantial financial obligation for a publicly owned utility and are often disputed. This article addresses what is reasonable, fair, and legal in relation to such transfers and provides recommendations for local governments. Local government officials should: recognize that funding nonutility-related operating or capital costs with utility revenues is not considered a utility best management practice by credit-rating agencies; routinely calculate-and maintain written documentation for-allocations that equitably represent the cost of general fund services provided to the utility; be able to provide written evidence justifying the fairness of the amount or percentage of a transfer representing a rate of return on the utility's investment, provided the transfer is legal and allowable by debt covenants; promote government transparency by separating transfer components in utility budgets; and adopt financial policies that allow easy calculation and projection of transfer amounts.