The less rain that falls from the sky, the more money the city of Houston makes by selling water.

It is a rule of thumb that the city has lived by in rainy seasons and dry ones, but it does not appear to be true this year; At least not yet.

City controller Annise Parker calls it a “topsy-turvy” situation, which she and other city leaders are struggling to understand.

“Perhaps it’s the economy,” she said. “Perhaps, people are making the decision to let the grass dry rather than to run their water on the landscaping.”

Or perhaps, she said, the city’s Combined Utilities System just didn’t do a very good job estimating what the city will take in from water bills.

“There’s a problem, internal to the city, that we have to do a better job estimating revenues and expenses, and making adjustments mid-course,” she said.

According to Parker and Finance Director Michelle Mitchell, last Friday the Combined Utilities System told city leaders that its 2009 revenue from water sales would be $7 million less than it had projected just a month earlier. At the same time, the department said that expenses had risen by $2 million.

Parker said it would have been useful for the City Council to know that before it passed the 2010 budget, which had happened a week earlier. She called the disclosure “a big surprise.”

City Council member Anne Clutterbuck, who directs the budget process for the City Council, said the Combined Utilities System has had problems projecting its own revenues for at least ten years.

“This problem has been brewing,” she said.

Clutterbuck said that there is now a “looming crisis” because several lines of credit will become due early next year. She said that inaccurate revenue projections could affect the city’s bond rating, which impacts the interest rates the city can get on massive loans.

But Susan Bandy, who runs the Combined Utilities System, says the problems can be traced back to Hurricane Ike and an unlucky mix of abnormal weather patterns and a gloomy economy.

“People stopped watering their lawns after Ike,” she said. “And they didn’t start up again in April like they normally do.”

Nor did Houstonians water their lawns in May, she said, or even the beginning of a scorching June, when the department handed over the monthly revenue update that included the $7 million drop in revenue projections. It was only after the department made its latest revenue projection that the tide turned, she said.

“I can tell you the day that people started watering again. It was June ninth,” Bandy said.

For whatever reason, that was the day that city residents decided that Mother Nature wasn’t coming to the rescue.

Since then, the pumps have been struggling to keep up with heavy water demand, she said, and the dry weather is contributing to a jump in the number of water main breaks.

For that reason, Bandy said she is not confident that June’s increased water usage will make up for the revenue drop, because maintenance costs will probably jump.