Illegal Transfer of Venue Funds to Tourism and Promotion Fund

For the past three fiscal years, the City of Austin has engaged in an illegal transfer of funds from the Town Lake Park Community Events Center Venue Project Revenue Fund to the City’s Tourism and Promotion Fund.

For the current 2010-2011 fiscal year, this transfer is $130,000. (See the FY 2010-2011 City Budget page 225 (p. 236 in the PDF file).

For fiscal year 2009-2010, the transfer was $125,382. (See the FY 2009-2010 City Budget page 434 (p. 552 in the PDF).

For fiscal year 2008-2009, the transfer was also $125,382. (See the FY 2009-2010 City Budget page 488 (p. 610 in the PDF).

The prior three fiscal years also saw a $125,382 transfer into the fund, but the source was the General Fund, not the venue project Revenue Fund. The General Fund is a legitimate source of funds.

The first year of the illegal transfer (2008-2009) was also the first year the budget was under Marc Ott’s tenure. In the previous three years, the budget was developed by Toby Futrell.

Section 334 of the Local Government Code governs venue projects, including the Town Lake Park Community Events Center Venue Project. Section 334.042 clearly delineates all the eligible sources of revenue and all the eligible uses for that revenue permitted under law. In particular, Section 334.042(d) speaks to the uses:

Sec. 334.042. VENUE PROJECT FUND.
..
(d) The municipality or county may use money in the venue project fund to:
(1) reimburse or pay the costs of planning, acquiring, establishing,
developing, constructing, or renovating one or more approved
venue projects in the municipality or county;
(2) pay the principal of, interest on, and other costs relating to
bonds or other obligations issued by the municipality or county
or to refund bonds, notes, or other obligations; or
(3) pay the costs of operating or maintaining one or more approved
venue projects.

(The full text of Chapter 334 may be found on-line at Chapter 334 of the Local Government Code.)

Skimming a portion of venue revenues into the City’s Tourism and Promotion Fund is not among these uses allowed under state law and is therefore illegal and would not withstand legal challenge.

Council must immediately direct the City Manager to halt or reverse the $130,000 transfer of funds from the venue Revenue Fund for the current fiscal year. It must also reverse the previous two years’ transfers, restoring the $250,764 to the venue fund, plus accrued interest if such is the policy for interdepartmental loans.

If such a transfer is contemplated for the 2011-2012 budget, it must be withdrawn immediately.

Both the City Manager and the Law Department should be sanctioned for initiating and authorizing this illegal fiscal activity. Regarding the Law Department, the matter has already been referred to the State Bar of Texas.

On June 5, Council and the City Manager were notified of this violation in the 2010-2011 budget. Lack of response is unacceptable and constitutes another chapter in the financial abuse of the venue project, the pattern of which exposes the project and the City to uncertain risk.

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