This is illegal.
Here's what the Ohio Revised Code has to say about such funds (emphasis added):
743.06 Proceeds from water works to be a separate fund.
Money collected for water-works purposes shall be deposited weekly with the treasurer of the municipal corporation, and shall be kept as a separate and distinct fund. When appropriated by the legislative authority of the municipal corporation, such money shall be subject to the order of the director of public service. The director shall sign all orders drawn on the treasurer of the municipal corporation against such fund.
743.05 Disposition of surplus funds.
After payment of the expenses of conducting and managing the water works, any surplus of a municipal corporation may be applied to the repairs, enlargement, or extension of the works or of the reservoirs, the payment of the interest of any loan made for their construction, or for the creation of a sinking fund for the liquidation of the debt. In those municipal corporations in which water works and sewerage systems are conducted as a single unit, under one operating management, a sum not to exceed ten per cent of the gross revenue of the water works for the preceding year may be taken from any surplus remaining after all of the preceding purposes have been cared for and may be used for the payment of the cost of maintenance, operation, and repair of the sewerage system and sewage pumping, treatment, and disposal works and for the enlargement or replacement thereof. Each year a sum equal to five per cent of the gross revenue of the preceding year shall be first retained from paid surplus as a reserve for waterworks purposes.
The amount authorized to be levied and assessed for waterworks purposes shall be applied by the legislative authority to the creation of the sinking find for payment of any indebtedness incurred for the construction and extension of water works and for no other purposes; provided, where such municipal corporation does not operate or maintain a water works or a sewage pumping, treatment, and disposal works, any or all such surplus may be transferred to the general fund of the municipal corporation in the manner provided for in sections 5705.15 and 5705.16 of the Revised Code.
743.08 Investigation by legislative authority.
The legislative authority of a municipal corporation in which water works are situated or are in the process of construction may appoint a committee for the investigation of all books and papers, and all matters pertaining to the management of the water works, at least once a year, and more often, if necessary by reason of the neglect of duty or malfeasance on the part of any officer of such water works. Any such officer found by the committee to be so offending shall be liable to removal from office by the legislative authority.
Let the fireworks begin!