WATER FUND Erie must repay $1.5M, state says

The state considers the borrowing a loan.
ERIE (AP) -- The financially troubled city must repay $1.5 million to its water reserve fund or risk violating state law, auditors said.
The city took $1.5 million out of the fund's $13 million account in 2003 and spent it on operating expenses. Because the money did not go toward capital expenses, it's considered a loan and the city is legally obligated to repay it, Erie's auditors said.
The water reserve fund was created out of the lease of Erie's Water Department to the Erie City Water Authority in the early 1990s. The fund was designed to function like a savings account and could only be used for capital improvements, such as a building.
Erie City Council members last week learned that the city had to pay back the money, council President Jim Thompson said.
The news came as the council and Mayor Rick Filippi's administration try to offset a projected $5 million budget deficit for 2004 and lay out the 2005 budget.
Filippi's administration "had always assumed that the money had to be repaid," said Tina Mengine, the mayor's aide. The mayor likely will call for the money to be repaid through a long-term note, she said.
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