GUC, city have new agreement for calculating yearly fund transfer
Friday, May 19, 2017
Greenville Utilities and the city struck a new agreement about the formula used for the annual transfer of funds from the utility to the city.
The new formula should stabilize the fluctuations created by the current funding formula, said Chris Padgett, GUC chief administrative officer.
The GUC Board of Commissioners unanimously approved the memorandum of understanding during its Thursday meeting. The Greenville City Council approved it at its April 10 meeting.
GUC's charter requires it to transfer funds based on a percentage of its electric and natural gas system fixed assets, less the debt owed on the assets, plus 50 percent of the retail cost to providing the city's public lighting, Padgett said. Because GUC is owned by the citizens of Greenville, the transfer was likened to a dividend payment to the citizens, he said.
During the last 10 years the GUC transfer has contributed $57.4 million to the city’s general fund. In fiscal year 2015-16, the $7.35 million in revenue provided by the transfer was equivalent to 11 cents on the city’s property tax rate.
The problem with the current formula is the amount of money generated can fluctuate dramatically, Padgett said.
That's because the formula is based on the results of the prior fiscal year audit which is released in the fall, usually four or five months after the estimated transfer amount is adopted as part of each entity's budget, Padgett said.
Under the new formula, a three-year average of GUC's audit results will be the basis for the funding transfer formula, Padgett said.
The fluctuations can be significant. In fiscal year 2015-16, it was expected GUC would transfer about $6.5 million to the city, Padgett said. Instead it gave the city about $7.35 million, an $850,000 surplus. This year it was projected the city would receive $6.5 million; instead it will receive $6 million, a $500,000 deficit.
The GUC transfer is the city's third largest source of revenue, behind property tax and sales tax, Padgett said.
Greenville City Manager Barbara Lipscomb, a GUC board member, urged the adoption of the memorandum.
So much of Greenville property isn't taxable because it's either owned by East Carolina University or Vidant Medical Center, she said. However, those entities purchase utilities.
Having a predictable revenue source will make it easier when deciding if the city can afford additional services such as adding police officers or firefighters, she said.
GUC Commissioner Rebecca Blount, an attorney, asked if changes in the memorandum of understanding followed the requirements of the charter.
Padgett said while the charter set the formula, it didn't specify if the previous year’s audit had to be used, and there's no record on how that came about.
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