The city of Irvine’s finance commission is questioning a planned transfer of $4.4 million to the city’s general fund reserves, with Commission Chairman Don Dressler saying the move would be akin to giving a “hot credit card to a teenager going to the mall.”
The funds are being pulled from two sources, but much of the money originated from a development impact fee, called a systems development charge, levied onto developers to offset the costs of infrastructure improvements like parks and roads.
Dressler says there is a city ordinance that might restrict the transfer of such funds into the rainy-day reserve. Even city staffers acknowledge that at least $1.5 million — accrued from interest in an account bankrolled by the developer fee — would be an unprecedented transfer.
$2.9 million would come from the close-out of a police station project that was never built. Money from the close-out of capital improvements usually go toward other capital improvements, Dressler said.
Dressler said the transfer would be an example of city staffers making it too easy for the City Council to avoid painful budget decisions.
“What you’re doing is you’re taking money that in the past would have been expected to be used for building, and now letting it be used for operating expenses,” Dressler said. “It’s not just another place to scoop up money.”
City Manager Sean Joyce says staffers are simply combing the city’s finances for allowable transfers to bolster the rainy-day reserves. Joyce said the policy decision was ultimately left up to the council.
The city has relied on the use of rainy-day reserve funds to preserve services and avoid layoffs over the past couple of years. To balance the 2010-11 fiscal year budget, the council opted to leverage $14 million in reserve funds and plans to continue dipping into reserves for the next fiscal year as part of a “three-year bridge plan.”
If the transfer in question happens, the city projects it will have $15 million in its rainy-day reserve fund to tap when efforts to balance the budget fall short.
Dressler says he has “serious questions” about the legality of the transfer given the original intent of the funds. He says he wants to see the city’s strategic business plan before green lighting such a transfer, a precaution that the City Council last week agreed to.
“Maybe they’re being good — maybe they’ve got a real good story,” Dressler said.