As a result, governments started using enterprise funds as a way to finance specific projects, collecting fees from end-users — or "customers," as the state auditor's office has called them. In a memo discussing whether state higher-education institutions could qualify for enterprise designation, the state auditor pointed out that a TABOR-exempt "enterprise should engage in arms-length market exchanges and provide goods and services at a market rate sufficient for the independent operation of the enterprise."

In 1993, the City of Denver took advantage of this new funding mechanism by amending the definition of its two enterprise funds — one for airport facilities and the other the Wastewater Enterprise Fund, which includes a sanitary-sewer fund and the Storm Drainage Enterprise Fund, whose expenditures were earmarked for the "cost of the administration, management, operation, and maintenance, planning and engineering of sanitary and storm sewer facilities." The fund could also be used to pay back bond debt, acquire land and buildings for storm drainage system facilities and buy equipment "that is or will become permanently attached to or a functional part of...any building or structure, and for other related operational expenditures."

In 1991, before TABOR, the city used water fees to build the Denver Wastewater Management building — dubbed "Gotham City Hall" — at 2000 West Third Avenue. Although the facility houses the city's wastewater operations — the division builds and maintains the city's 1,500 miles of sanitary sewers and 500 miles of storm drainage facilities — it also houses various Public Works agencies, as well as the department's customer service office.

Managers at the Wastewater Division say political appointees now control how enterprise fund money is spent.
Managers at the Wastewater Division say political appointees now control how enterprise fund money is spent.

But the Wastewater Management building was not wholly owned by the city. And in 2001, Public Works exercised an option to purchase it outright. To enable that move, Denver City Council approved a bill allowing for $4.1 million to be taken out of the general Wastewater Enterprise Fund. That same year, another city analysis found that $400 million was needed to improve the stormwater system of gutters, drainage tunnels and culverts. Some 10 million feet of sewer line snake underneath Denver; about 10 percent of that is over a hundred years old and in desperate need of repair. To fund a new storm system, Denver City Council approved a series of Stormwater Utility fee increases spread out over four years: 38 percent in 2002, 20 percent in 2003, 20 percent in 2004 and 20 percent in 2006.

This fee structure ensures that low-density properties with lots of grass or vacant areas pay less into the system, while properties containing dense commercial building or apartments with parking lots pay much more, and areas like downtown, with nary a permeable surface in sight, pay the highest rate, $4.48 per 100 square feet. These higher rates allowed the city to issue $30 million in revenue bonds on behalf of the fund in 2002 "to finance improvements to the City's storm drainage facilities."

In 2004, Denver City Council again took a look at the Wastewater Enterprise Fund and passed a bill allowing Public Works to take $1 million from the fund "to reimburse the General Fund for street sweeping costs." It would be the last time any such proposal went before council for approval. Because in October 2005, Public Works manager Bill Vidal sent a memorandum to Mayor John Hickenlooper detailing how operational expenses that the Street Maintenance division was incurring for such activities as street sweeping and alley paving could automatically be charged to the Wastewater Enterprise Fund.

Unpaved alleys, the memo reasoned, allow erosion that causes dirt and other materials to flow into the stormwater system; by the same token, street sweeping reduces debris that can flow down the drains. Vidal also argued that snow removal and ice scraping affects the flow of water into the storm system. But since all of this traditionally had been paid through the Public Works budget, "the General Fund has subsidized ratepayers in the Enterprise Fund," he noted. Therefore, from that point on, the Storm Drainage Enterprise Fund would pay 50 percent of the total cost to pave alleys, 50 percent of street sweeping and 25 percent of snow and ice removal. In addition, fund fees should pay Parks and Recreation at least $477,466 each year for mowing, weeding and litter control, since many of the city's parks also serve as flood control and storm drainage areas.

Councilwoman Jeanne Faatz recalls Vidal telling council about the new allocations. "This is a fairly common practice among cities," she says. "Enterprise funds have special designation. You can't tap or purchase just anything. The only thing that can be criticized is, 'Are those charges excessive?' They assured us it would be within the acceptable guidelines."

When John Orr started working for Wastewater Management thirteen years ago, the heads of the division were essentially in control of the projects that fund money would be spent on. But that power has gradually been co-opted by political appointees, he says. Today, Wastewater officials are often not even informed of the general-fund expenditures that will be attributed to their ratepayers, adds Orr, who last week retired as manager of the division's information systems.

This has inspired an inside joke at Wastewater Management regarding the division's status within the Department of Public Works: "If it rains on it, it's Wastewater's problem."

"Usually it's in the context of justifying an expenditure that Public Works wants to use the Enterprise Fund money for," explains Orr. "So somebody would say, 'Oh, now we're going to pay to paint bridge railings in Montbello.' And somebody else might say, 'What does that have to do with wastewater?' Well, rain falls on it."


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