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About those land sales…

The current fiscal year’s budget for the City of Houston includes revenue from the sale of some city-owned property to make it balance. This article talks about this and what might happen if they don’t sell before the end of the fiscal year, but it leaves out one critical piece of information:

Real estate sales of $40.6 million were built into this year’s budget based primarily on the sale of two properties: the public works building, which sits adjacent to the Federal Reserve Bank on Allen Parkway, and the city’s permitting offices at 3300 and 3400 Main.

With the sales, the administration would finish the year with a general fund balance, or surplus, of about $123 million. That would be about $3.7 million below the threshold the city has adopted as a measure of good fiscal stewardship.

If the sales do not clear before June 30, something the controller said is unlikely, the surplus could drop below $84.5 million.

Such a step would require a vote of City Council, since city ordinance requires maintaining a cash balance of at least 5 percent of operating expenditures, not counting debt service.

So, um, are there any buyers lined up? What stage of the purchasing process are we in here – finalizing the paperwork, haggling over the price, waiting for a buyer to get their financing in order, or waiting for a buyer to make an offer? Seems to me that makes a pretty big difference here. Yes, I know, the city and any potential suitors it may have will not want to speak on the record about any possible deals, but surely the point should be raised in the story. Without it, there’s no way to tell how big a concern this is.

One more thing:

[City Controller Ronald] Green said ratings agencies may look askance at dipping below that benchmark.

“Obviously, the more cushion you have, the better,” he said. “Any bank likes to see that people have money in the bank to be able to pay their debt. Going below that 5 percent is just not prudent.”

Acting Finance Director Kelly Dowe said he does not believe the city will dip below that mark. If it does, it will be temporary. The city would use the coming budget year to immediately restore the balance to 7.5 percent, or roughly $130 million.

This is another example of why “balanced budget” requirements are silly and counterproductive. Why shouldn’t the city be able to carry over the balance if it fails to meet an arbitrary deadline? How is that any worse than playing a shell game with the reserve funds? Or the “delay certain payments by a day so they fall into the next fiscal year” trick that the Lege has played before and will surely play again this session? I’m sure ratings agencies are perfectly capable of judging how realistic the city’s prospects are for getting the funds they’ve budgeted for in an appropriate amount of time, and can adjust their ratings accordingly. What exactly have we accomplished by marking a boundary point on the calendar?

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  1. JJMB says:

    The Chron is not writing about half of what it knows it could write about. Everyone knows that after the Mayor balanced her budget by promising property sales, she then did nothing on that issue for 6 months. The process is barely under way now, hence Ronald Green’s sending up a warning flare. And that failure by the Mayor is just one of the many reasons the most conscientious, hard-working and intelligent people at City Hall have been leaving the sinking ship. And the Chron won’t write about how much time the Mayor spent travelling around the country and the world in those 6 months … The Chron doesn’t want to report the full story, so it just drops these little hints about how bad things are.

    Note that the City’s finance director in the story is referred to as “Acting”. Note that there is no Mayor Pro Tem. Note that the smartest, most respected person at City Hall for the last 4 mayors “retired” last month. Note that the Mayor has shut out Sue Lovell and Melissa Noriega. Note all the time wasted on the Port Authority appointment, and then the Mayor’s spin was it was all Mike Sullivan’s fault (surprise! a conservative from Kingwood couldn’t bring himself to vote for a labor union bureaucrat — but funny how the spin didn’t mention that Lovell also didn’t vote for him, or Noreiga, or …). Note how Lovell had to take over completely and bail out the preservation ordinance, which was going down for failure to pay attention to even small concerns that could have been incorporated in a consensus draft (BTW, way to go CM Lovell!). Note that the Mayor now has a newly-hired, full-time political consultant camped out at City Hall (where Bill White had Mustafa Tameez down there for maybe 5 minutes, one day in six years). Note that the Mayor visibly shudders when anyone mentions how Bill White used to do things….. She apparently didn’t pay attention for the 6 years she was Controller. Instead, she only remembers HER mayor, the one who “led” so well while she was on Council. There’s a role model for you.

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  3. […] Revenue from the sale of 3400 Main was part of the fiscal year 2011 budget. Good to see they got it done before the June 30 deadline. Swamplot has […]