Denver officials have not adequately explained the formula that resulted in $48.5 million in street maintenance and construction since 2003 being paid from sewer fees instead of the general fund, according to a report from the city auditor, Dennis Gallagher.
The audit rapped a Hickenlooper administration decision to shift some street maintenance costs such as snow removal, curb and gutter construction and repair, street sweeping and alley improvements from the cash-strapped, taxpayer-supported general fund to a different fund supported by sewer fees residents pay with their water bills.
Money from the city’s wastewater enterprise fund is supposed to pay for improvements to the city’s wastewater system.
Bill Vidal, the city’s public works director, has said tapping that fee for street repairs and construction is justified because the projects have an impact on the wastewater system.
“Before I acted, the city’s general fund was subsidizing the wastewater enterprise fund,” Vidal said, adding that two consultant reports support his approach, as does the city attorney’s office.
Sidewalk rehab covered
Vidal has decided ratepayers should pick up 100 percent of the annual costs of sidewalk and gutter rehabilitation; half of the cost of paving alleys, sweeping streets and building new curbs and gutters; a quarter of the cost of snow removal; and 10 percent of the maintenance costs of parkland.
A 2007 report from Red Oaks Consulting, which reviewed practices detailed by the Florida Stormwater Association, supported Vidal’s decision.
“Overall, the adopted allocations based on professional judgment appear reasonable and are consistent with percentages used in other areas,” the consultant said.
But the audit, released March 18, warned: “The city could face a legal liability due to public works’ lack of documented analysis” of how it arrived at those figures.
It points out that in 2007, San Diego settled a lawsuit on behalf of sewer ratepayers for $40 million. But that lawsuit didn’t involve an argument over how the money was being spent. Instead the litigation revolved around whether San Diego was charging residents higher sewer fees than it did businesses.
In 2004, Denver had sewer ratepayers pick up $1 million of the costs of street maintenance. By 2008, the city billed sewer ratepayers for at least $18.5 million for street maintenance. And since 2003 the city used about $30 million from the wastewater enterprise fund to pay half the cost of new curb and gutter construction.
The audit also found that the administration billed ratepayers for nearly $16 million to purchase land and prepare it for construction of a new $59 million public works department headquarters along the west bank of the South Platte River.
The audit said that land purchase appears appropriate but said a verbal agreement by the public works department to reimburse the enterprise fund should be formalized in a memorandum of understanding.
In a 2005 memo to the mayor, Vidal said half of the street sweeping costs could be shifted to ratepayers because sweeping reduced particulates that go into wastewater. Vidal also said city workers began using chemicals to remove snow instead of spreading streets with sand, a move that also reduced maintenance costs to the wastewater system by eliminating harmful salt.
The audit questioned that stance. Curbs and gutters don’t just direct storm water, the audit pointed out. They also serve traffic safety functions, but Vidal has decided the enterprise fund, supported by ratepayers, should be responsible for all of the cost of repairing them, the audit said.
Further, shifting the maintenance costs to the wastewater enterprise fund occurred with little cost methodology support, the audit said. It said Vidal justified the allocations in a memo by citing his “professional judgment” and his “professional opinion.”
The audit said public works managers now are contemplating a rate hike.
Court approved shifting
A 2001 Colorado Supreme Court ruling found that municipalities can engage in the type of cost shifting Vidal is using but must ensure the fee is proportionate to the tasks for which they are charged, the audit found.
The audit stated that officials at other cities surveyed, in Akron, Boulder, Broomfield, Fort Collins and Salt Lake City, reported they were more stringent on the type of costs they had ratepayers shoulder.
Councilwoman Jeanne Faatz, the sole Republican on the City Council, has scheduled a review of the audit with other council members during the council’s Finance Committee meeting April 7.
Christopher N. Osher: 303-954-1747 or cosher@denverpost.com
