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The city’s current budget situation

With the way the economy has been over the past year, we shouldn’t be surprised that the city of Houston is facing a revenue shortfall – the same thing is happening at the state level as well. The question is how are we going to deal with it.

“The city of Houston’s finances are in good shape,” [Mayor Bill White] said at a news conference Monday, noting Houston has weathered a hurricane and a global financial crisis. “We’ve been tightening the belt with plans this month. We can do so without compromising essential city services, although there will be some tough choices … I’m confident we’re going to close this gap, although it will take financial discipline.”

Those tough choices could include charging people who do not recycle according to the amount of garbage they send to landfills, White said, or closing Brock Park golf course, a city-run enterprise that loses $500,000 a year and that brought controversy when City Council passed the $4 billion budget in June.

Other possibilities include selling off real estate; delaying some expenditures on technology and new helicopters for police; cutting positions in certain departments; or seeking quicker reimbursements from insurers or the Federal Emergency Management Agency for costs associated with Hurricane Ike, according to a memo White sent City Council members Monday.

Isiah Carey and Mary Benton had more on this yesterday. Does this mean that some of those task force recommendations from 2007 on waste reduction might get implemented? Some of that, along with a “pay as you throw” scheme for trash pickup, would be a positive thing to come out of this.

The mayor took umbrage with City Controller Annise Parker’s statement in her monthly financial report, which will be presented to a City Council committee today, that the city has a $103 million budget shortfall.

About $50 million of that was already built into the budget as a drawdown from a surplus “fund balance” that White said he built up in five-and-a-half years as mayor for trying financial times such as these.

[…]

Parker said her characterization of the city’s financial state was accurate, since the most current estimates show expenditures exceeding revenues by $103 million.

“We are not immune to the economic realities that are affecting this country,” she said. “While we have budgeted carefully with a close eye on the bottom line, in this newly passed budget the revenue has come in less than anticipated, and adjustments are going to have to be made. That will involve spending cuts.”

[…]

In order to preserve a position of financial security, which is a key factor in its bond rating, the city must maintain at least $126 million in reserves. Without using cuts or other means to close the gap, the city will come within only a few million of that key figure.

White said raising the property tax rate is off the table.

More here. It’s election season, and I understand that nobody wants to talk about taxes in any context other than reductions at times like this. But honestly, why is there no consideration being given to raising the property tax rate by a tiny bit? For every year of Mayor White’s term except for this one, the budget included a small cut in the property tax rate. In 2008, for example, the rate was cut by half a penny, with the reason given that times were good and we could afford it. Well, times are bad and we can’t afford it any more. I don’t know how much revenue that lower tax rate has kept out of the city’s coffers, but I do know that a proposed one cent tax cut for Harris County would have cost $25 million in revenue, while saving the average homeowner a whopping $12 a year. How much would the city’s rate have to be raised, and how much would it cost the average homeowner annually, to cover this shortfall and prevent any further cuts in city services? I’m betting the answer is “not much” to both. So why is this not on the table? Why are all these cuts being considered first? It makes no sense to me.

All I’m saying is that if all options really are being explored, then this has to be one of them. Tax cuts have become basically an entitlement these days, and it’s just not sustainable. Sooner or later, we need to recognize this.

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2 Comments

  1. Baby Snooks says:

    Doesn’t look like the city finances are really in such great shape and the mayor and the controller can play politics with it all they want, which they will, but bottom line is things probably will get worse for the city and the county as HCAD begins to face the reality, as they face lawsuits, that everything is overvalued. Lowered valuation = less revenue. The state, if it’s not careful, is facing the same reality.

  2. Lucas says:

    Kuff,
    The City of Houston has run a spending deficit of about 10% of revenue every year since 2004 (through the 2008 CAFR) . In the same period expenses have climbed from $2.54 billion to $4.0 Billion. This is an extraordinary increase in spending, fueled by increased borrowing, a little over $3.5 billion in additional long -term liabilities.

    If you asked the Mayor and Council how they would spend an extra $1.5 Billion next year, they would FAINT at the concept. But that is exactly what’s occurred.

    All of my data is from the annual CAFR reports on the City Controller’s web site.

    I find the talk of a budget squeeze, and a $50 million shortfall fairly silly. The reality is that we’ve hiked spending (on increased revenues) almost 80 times greater than that amount over the last few years. Given the time, it would be interesting to see exactly where this increased spending occurred. I just hate the spin of “cutting essential services” when the fact is we’re literally spending a BILLION a year more than in 2005, just a few short years ago.