A barrage of lawsuits has forced the city of Española to pull about $191,000 from different departments to cover mounting legal fees and settlements.
The city will make up for the shortfall by pulling about $174,000 from the Water Department and about $17,000 from the Sewer Department, according to a budget request that was approved Nov. 27 by the City Council.
City Attorney Spence Pacheco's budget for claims, settlements and judgments has plunged $41,000 into the red because of a settlement with former finance director Lillian Brooks (see related story on page A13).
A $55,000 settlement with two Española residents also put a dent in Pacheco's budget. The settlement, which was paid in October, was over the city's decision to turn off the residents' water.
The deficit has been covered by money from the general fund.
Pacheco had been budgeted $147,691 for claims, judgments and settlements for fiscal year 2008, which runs from July 1 to June 30, 2008.
Brooks' $29,995 settlement could pave the way for two similar suits related to the firing of several employees at a March 28, 2006, city council meeting.
The money being taken to supplement Pacheco's depleted budget includes:
• $150,000 from the water utility fund, which generates money from water bills. Lujan said this money was originally budgeted for claims but was never transferred.
• $24,000 from the Water Department that was earmarked to purchase a new truck for the department. This amount will eventually be paid back to the Department, Lujan said.
• $17,161 that was left over in the solid waste fund after revenue was dedicated to North Central Solid Waste Authority.
Cordova said the $150,000 had originally been set aside for Pacheco's judgments, claims and lawsuits budget, but had never actually been transferred.
"When (former finance director) Susan (Trujillo) and (City Manager) Gus (Cordova) did the budget, they separated that money for the city attorney," Lujan said. "But (Trujillo) never actually transferred it. She left it as a line item and not a transfer."
Lujan said no one actually caught the mistake until they started looking at the budget to find out where they could pull money for the city attorney's budget.
Water Department Director Marvin Martinez said the $24,000 being pulled from his budget was set aside to buy a new truck for the department.
"We were supposed to buy three new trucks," Martinez said. "Now we'll just buy two for now. I still need trucks, but I can use an old one for the year."
Lujan said the $24,000 will be paid back in next year's budget.
Martinez said his department seems to be one of the only departments that is still succeeding financially.
"We're one of the only departments that had foresight," Martinez said.
Martinez said the $150,000 had not been allocated for anything and was simply set aside to deal with any lawsuits concerning utilities.
This is not the first time the water utility fund, which generated $2.5 million last fiscal year, has been tapped to cover the city's financial shortfalls.
This fiscal year, $214,578 was transferred from the fund to the city's general fund.
In addition, another $387,927 was transferred to help repay a $7 million bond taken out by the city in 2002 for various projects, some of which were related to the water department, Martinez said.
About $200,000 was transferred from the sewer fund and about $319,000 from the general fund to repay the bond, Lujan said.
"It's one of our biggest revenue sources," Lujan said of the Water Department fund.
Over the past four fiscal years more than $1.5 million has been transferred from the water utility fund to the city's general fund and more than $1.4 million has been used to pay for bond payments, city documents state.
The solid waste fund had been devoted to the city's solid waste service until the North Central Solid Waste Authority took over those services.
Lujan said money from that fund, which comes from a environmental gross receipts tax administered by the state, now goes to North Central Solid Waste Authority.
"We had accrued two months of funds in that account before the actual switch," Lujan said. "We only took one month, which was about $17,000, so that we could still pay for what we needed to out of there."
In about a month, the city will review its financial status and decide what needs to be done to balance out spending.