Loveland's Independent News Source
Loveland, February 7, 2013

The City of Loveland has been diverting funds paid by utility customers into its Water and Power Department for
economic development efforts during the past ten years.  Loveland's Water and Power Department operates two
enterprise funds; one for water utilities and the other for power.

Loveland's adopted budget for 2003 shows the first year of the diversion on page 511, when former Loveland City
Manager Don Williams approved using utility monies to cover 50% of the annualized salary for the city's first full time
Director of Economic Development.  This practice continued for the next ten years bringing the total diversion from
the city's power utility into the economic development department budget at over half a million dollars.

Today the practice continues only the accounting is more difficult to find.  In 2012, the city began transferring some
$60,000 annually to the city's general fund which in turn covered the complete salary of Betsey Hale, Loveland's
Director of Economic Development.  In previous years, 50% of Hale's salary and that of her predecessor came directly
from the city's Water and Power Department instead of going through the city's general fund.  The city's 2012 adopted
budget on page 10-4 contains a "variance comment" added by city budget officer John Hartman explaining the
diversion of money from the utility fund into the city's general fund for the purpose of covering 50% of the Economic
Development Director's salary.

Enterprise funds, by law, cannot be used to fund general city services unrelated to the utility.  Ironically, some in city
hall have sought to defend the reimbursement by arguing the utility is like a business so economic development
increases the number of users to the utility therefore creating a larger economy of scale and lower overall rates.  
Unfortunately, recent efforts to raise water rates in the city have argued the contrary, claiming it is the increasing
numbers of users necessitating the dramatic increases in water rates being proposed by the city's Department of
Water and Power.

Loveland's Utility Commission (citizen volunteers who oversee the city's utilities and advise council)
discussed removing the water fund's status as an enterprise fund for 1 year to receive additional funding from
Loveland's general fund to cover the cost of much needed repairs.  LovelandPolitics has been unsuccessful in finding a
utility commissioner who was aware of this diversion of half a million dollars or could provide any explanation of how
the salary of the city's director of economic development is related to providing either water or power to city

Last November, Loveland's daily newspaper ran
an editorial regarding the need to keep costs of the city's utility
enterprise funds separate form the city's general fund.   Curiously, the editorial advocated the only remedy for
repairing utility infrastructure problems is to raise rates on city utility users.   While we agree, in principle, with this
strict interpretation of how an enterprise funds are is supposed to work, it hasn't really been Loveland's practice.  

Legal Ramifications

Loveland could faces legal penalties and even a loss of its "enterprise fund" status for its enterprise funds should a
citizen bring a complaint to the state level.  So far, few if any on Loveland's council or city staff, contacted for this
article, appeared to be aware of the cross charging or had any explanation.
$537,000 Diverted From Utility
Payments Into Economic Development

Enterprise Fund

In governmental accounting,
fund that provides goods or
services to the public for a fee
that makes the entity
self-supporting.  It basically
follows gaap as does a
commercial enterprise. An
example is a
government-owned utility.

City's are prohibited from
using enterprise fund money
for services unrelated to the