revenue cap

Mayor Turner’s final budget

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Mayor Sylvester Turner

Mayor Sylvester Turner will unveil a $6.2 billion budget proposal this week, the final spending plan of his tenure and one he predicts will have enough savings to cover his successor’s first budget gap.

The budget plan includes previously announced pay raises for all city workers, continues the mayor’s plans to address crime and illegal dumping, and adds another $11.3 million toward the city’s backlog of deferred maintenance. It also includes a stark increase in tax dollars for “Build Houston Forward,” the city’s streets and drainage program, jumping from $77 million this year to $123 million next fiscal year.

Perhaps most notably, though, it would sock away $401 million in savings, $220 million above the required reserve of 7.5 percent of the general fund’s expenditures. That, essentially, matches the latest estimate for what the city will have saved at the end of this fiscal year, and it marks the largest reserve in decades at City Hall.

“This represents the strongest fund balance in recent history for a proposed budget,” Turner wrote in his message accompanying the budget. “Additionally, the budget fully funds the Budget Stabilization Fund representing more than $20 million and does not include any deferrals, one-time land sales, or fund balance drawdown.”

[…]

Houston typically operates at a structural deficit with expenses growing faster than revenues, and it must close annual budget gaps with stop-gap measures. As in the last three years, this year’s spending plan would rely heavily on federal COVID-19 relief money to avoid that fate.

The Fiscal 2024 budget, which would take effect July 1, would use $160 million in funds from the American Rescue Plan Act. The city received more than $1 billion in aid from the federal government during the last three years, money that has helped it avoid “significant” service cuts and layoffs, Turner wrote.

The city’s financial outlook likely will be a hot topic during this year’s mayoral race. Previous forecasts have called for deficits of between $114 million and $268 million during the next mayor’s first term, as the city weans itself off federal assistance. The city has spent $344 million of the $607 million it received from the American Rescue Plan Act, as of March 31.

That would leave the city with roughly $263 million left before the adoption of this year’s budget, and about $103 million if the fiscal 2024 budget is adopted as drafted. Cities must obligate the relief money by the end of 2024 and spend it by the end of 2026.

As part of his message, Turner argued the strong fund balance would give his successor breathing room when crafting next year’s budget.

“As we look ahead, strong financial management will need to continue,” Turner wrote. “The city of Houston operates under one of the country’s most restrictive property revenue caps — in addition to complying with the State of Texas revenue cap, and the pressure of inflation. Despite those challenges, the financial health of the city is much stronger than existed on January 1, 2016. Any gap that may exist in FY2025 can be full covered by the fund balance.”

Turner was referring to Houston’s voter-approved revenue cap, which limits yearly growth in property tax receipts to a combination of population and inflation growth or 4.5 percent, whichever is lower. The city has cut its tax rate eight of the last nine years to comply with that restriction, foregoing about $1.5 billion in revenue since Fiscal Year 2015 through last year. In that time, it has saved the median homeowner roughly $946.

You can see more details and video from the press conference on Tuesday here. You know my opinion of the idiotic budget cap already, so I won’t belabor that except to say the next opportunity to have a referendum to amend or repeal it will likely be 2026. Hope the next Mayor can hold out till then. I expect we’ll hear a lot about the city’s current and future financial position as the campaign progresses. There will be budget hearings in the coming weeks, and vote on the budget by Council in June.

How was there still an active lawsuit over the 2004 revenue cap referendum?

Apr 22nd, 2023

by Charles Kuffner.

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I am gobsmacked.

The Texas Supreme Court on Friday struck down part of Houston’s revenue cap, creating the possibility that the city may have to comply with an even more stringent cap in the future.

Elected officials in Houston long have blamed the city’s revenue cap for lagging services, keeping more than $1.4 billion from the city’s coffers since 2014. If Houston were forced to implement the stricter cap, current and former city officials have argued it would be “financially devastating.

“The ruling in the 19-year-old legal dispute stems from the 2004 municipal elections, when Houston voters passed two separate caps on the city’s revenues. Anti-tax activists proposed a measure that would cap increases in total city revenues to the sum of population growth and inflation. That initiative became known as Proposition 2.

Then-Mayor Bill White, in response, offered an alternative: The city would limit annual increases in property tax revenue to the sum of population growth and inflation, or 4.5 percent, whichever is lower. City Council put that measure on the ballot, known as Proposition 1, with language saying it would preempt Proposition 2 if it got more votes. Both caps allow the city to ask for voters’ approval to exceed their respective limits.

Houston voters passed both measures, and supported Prop 1 by a greater margin, 64 percent to 56 percent for Prop 2. The city implemented the White administration’s version and came up against the cap for the first time in 2014. It has cut its property tax rate eight times in the last nine years to comply with that measure.

“There is an impact on the services the city can deliver in the general fund with Prop 1,” said former Mayor Annise Parker, who served as city controller when the ballot measures passed. “It would be financially devastating to implement Prop 2.”

[…]

The city’s charter has a provision for when inconsistent amendments are adopted, saying “the amendment receiving the highest number of votes shall prevail.” The question for the trial court will be whether the two propositions are inconsistent.

“The trial court noted that aspects of the two amendments may be harmonized, but it did not undertake that effort because it gave effect to the primacy clause and disregarded Proposition 2 in its entirety,” Bland wrote.

Mayor Sylvester Turner’s office said the city has argued for nearly 20 years that they do conflict. He said Friday he is confident the trial court will agree, leaving the current cap in place.

“Houston has faithfully enforced one of the country’s most restrictive property tax revenue caps for almost two decades,” Turner said in a statement. “When Houston voters were presented with a choice of two competing caps, they clearly chose a restriction on property tax rates and revenue alone. I remain confident that the conclusion of this case will find the charter amendment revenue caps are inconsistent and apply only the limitations of Proposition 1 with which the City has faithfully complied — in addition to complying with the recently enacted State of Texas revenue cap.”

I couldn’t find anything in my archives relating to this lawsuit, so I have no idea what its history is. The city has prevailed in past litigation, but as with the neverending efforts to kill Obamacare the fringe lunatics who keep fighting this keep finding new ways to keep trying. I have no idea what happens next, but as I am waiting for news of a different Supreme Court ruling as I write this, I hope this is the worst news from any kind of Supreme Court we got on Friday afternoon. I’m going to go light a candle and toss some salt over my shoulder now.

Mayor Turner’s final year

Jan 3rd, 2023

by Charles Kuffner.

4 comments

The big local political story, besides whatever violence the Legislature commits to Houston and/or Harris County, will be the 2023 Mayor’s race. The incumbent still has a full year to go, though, and he has his plans for what he wants to do with his remaining time in office.

Mayor Sylvester Turner

Mayor Sylvester Turner plans to focus his final year in office on moving existing projects across the finish line, with an emphasis on housing, crime, parks and community facilities.

Turner said he wants to accomplish his administration’s goal of helping to build 10,000 new housing units in his second term, while also continuing the city’s progress since 2012 in reducing homelessness. His “One Safe Houston” plan to address violent crime has several elements that are funded through the rest of his tenure, including expanded crisis response teams. And there are renovations underway in 22 community parks that he wants to see through before his term ends in January 2024.

“It’s about finishing up many of the priorities and projects that are currently on the books,” said Turner, who revealed recently that he worked this summer while battling a cancer diagnosis. He now is cancer-free.

Next year, though, could force confrontations with structural issues at City Hall that Turner is satisfied to leave to his successor, such as a potential adjustment to the city’s revenue cap, and the resolution of a yearslong contract stalemate with firefighters that has spanned nearly his full tenure, and which now rests with the Supreme Court.

[…]

Turner has said a garbage fee — Houston is the only city in Texas without one — is necessary to sustain Solid Waste operations, though he is not likely to take that on in his final year. He likewise has argued an adjustment to the revenue cap is necessary. The most recent discussion of the cap came in October, after it forced the city’s eighth rate cut in nine years. At-Large Council Member Michael Kubosh wondered aloud how the city could afford its growing police and fire budgets with those restraints. Turner said he would present an adjustment to the cap if council desired it.

Turner said that adjustment proposal still is in the works but acknowledged he is not “100 percent on it.”

“Some of the these things need to be left for the next mayor,” he said, and the ruling in the firefighters dispute could affect his calculus, as well. “A modification of the revenue cap may not be adequate to address it. In that case, I won’t present it. I’ll leave it up to the next mayor to address how he or she, and the people in this city, should deal with it.”

Turner argues he has done his part tackling intractable problems facing the city. The 2017 pension reforms he ushered in have slashed the city’s daunting debt in that arena from a $8 billion liability to about $1.5 billion. The issue that once dominated city government and politics now is mostly an afterthought. The city’s liability for retirement benefits likewise was expected to grow to $9 billion over 30 years, but cuts Turner implemented are expected to reduce that at least in half.

“I can’t fix everything, but we’ve fixed a whole lot,” Turner said.

Turner and other elected leaders in the city long have said the cap strains the city’s finances and hinders its ability to provide adequate resources to residents. It has cost the city about $1.5 billion in revenue since it first hit the cap in 2015. In that time, it has saved the owner of the median Houston home about $946, or about $105 per year.

I’m not sure I have any hope left about raising the revenue cap. If there actually is some action on it, the most likely scenario is what we have done before, which is to carve out a limited exception for public safety spending. That’s more likely to pass a public vote, and less likely to get cracked down on by the Legislature. It’s at best a band-aid, if it even happens, but you know nothing significant will ever happen until we have a different state government, and we know that ain’t happening for at least another four years.

As for the firefighters, there are two issues that need to be resolved by the courts before anything gets left as a mess for the next Mayor, and those are the pay parity lawsuit and the HFD collective bargaining lawsuit, both of which just had hearings before SCOTx. I have no prediction for either – we may or may not get rulings on them before the November election, but if we do there will be a big new issue for the candidates to talk about. Modifying the revenue cap in some form would leave the next Mayor a bit of leeway in how they try to resolve whatever they need to resolve with these issues. I don’t need more reasons to support modifying the stupid revenue cap, but other people do, so there you have it.

As for the long-discussed trash fee, I support the idea as long as the funds are used to really improve solid waste collection in the city. There’s plenty of innovation out there, but just making sure everything gets picked up in a timely fashion, which is a labor and equipment issue at its core, is the first priority. I think this has a better chance of passing this year than in the future just because some number of people who won’t be facing re-election can vote for it, but we’ll see. Just have a productive last year in office, that’s all I ask.

We could maybe vote on a piece of the stupid revenue cap next year

Oct 8th, 2022

by Charles Kuffner.

2 comments

Yippie.

Mayor Sylvester Turner

Mayor Sylvester Turner said Wednesday he will ask voters in 2023 to amend the city’s cap on property tax revenue to allow for more public safety spending, as the council cut the city’s tax rate for the eighth time in nine years to get under that limit.

Turner said he would bring language to City Council shortly to put the measure on the November 2023 ballot, after At-Large Councilmember Michael Kubosh expressed concern about how the city will be able to afford the increasing police and fire budgets with strained resources.

“If there is strong sentiment on this council to at least allow the voters to decide, well, let’s put it this way: I’m willing to put it before you and then allow the voters to make that decision,” Turner said. “I will put it before you to be placed on the November ballot of next year.”

City Council voted unanimously to cut its property tax rate by about 3 percent, moving from 55.08 cents to 53.36 cents per $100 in valuation. The city accounts for about 20 to 25 percent of a standard Houston property tax bill, with about half going to the local school district.

The city’s cap on property taxes limits the growth in revenue to a formula that combines inflation and population increases, or 4.5 percent, whichever is lower. The city hit the former mark this year, as is standard.

Houston first hit the cap in the 2015 fiscal year, and its tax rate since has fallen about 16 percent, down from 63.88 cents per $100. The city has missed out on about $1.5 billion in revenue as a result of those cuts, according to Turner’s administration. The owner of the median Houston home in that time has saved about $946, or about $105 per year.

[…]

Voters tweaked the cap in 2006 to allow the city to raise an additional $90 million in revenue for public safety spending. It was not immediately clear whether the ballot language Turner is proposing would increase that number or seek to carve out public safety spending entirely. The police and fire departments account for $1.5 billion in spending in the city’s current budget.

You know how I feel about revenue caps. At least this will give all those who rail against “defunding the police” the opportunity to put their money where their mouths are. I expect there will be at least one lawsuit filed over this regardless, and given what we’ve seen with other litigation it will still be ongoing in 2033.

January 2022 campaign finance reports: City of Houston

Mar 6th, 2022

by Charles Kuffner.

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January finance reports are always worth a look, if only as a ritual to start the new year. We’re a year out from election season truly beginning for Houston, but as we now have two brand name contenders for Mayor already, we should check in and see how our current electeds are doing in the fundraising department. I last looked at these reports in July of 2021. Let’s see what folks have been up to since then.


Candidate     Raised      Spent     Loan     On Hand
====================================================
Turner       311,976    156,329        0     723,455

Peck          25,620     13,989    5,000      27,442
Jackson        2,775      8,725        0      27,367
Kamin         14,620      7,824        0     124,434
E-Shabazz      8,440     13,625        0      15,282
Martin        56,350     32,011        0     162,311
Thomas        
Huffman       21,550     24,921        0      27,040
Cisneros       9,495      2,033        0      25,758
Gallegos      50,355     16,218        0     114,905
Pollard      151,275     12,946   40,000     441,900
C-Tatum       10,000      8,576        0     118,827

Knox          13,385      5,227        0      17,884
Robinson      50,595     11,758        0     189,134
Kubosh        33,200     31,914  196,000      73,174
Plummer       14,191     22,440        0      25,473
Alcorn       153,700     26,652        0     158,067

Brown          3,000      6,067   75,000      38,887

As a reminder, no links to individual reports here because the city’s system generates PDF downloads, and I don’t have the time to rename and upload and share them. Next year, when there are candidates, I’ll do that. Not this time.

Mayor Turner is the biggest recipient of campaign cash, which is usually how it is. He won’t be on the 2023 ballot, but we will have at least two charter referenda in our future, and I’m sure he’ll want to be able to have some influence over them. As was the case with Mayor Parker and term limits in 2015, he might want to add one or two more to that list, on policy matters that have been discussed but not yet addressed. I’m thinking of the stupid revenue cap, and a second try at an equal rights ordinance, this time for the charter. I have no special insight on these matters, just a long memory and a searchable archive, both of which I endeavor to use for good and not evil.

The fact that we have two high-profile Mayoral candidates in place (well, as much as one can be at this early hour) doesn’t mean that there aren’t other potential Mayorals out there. Last time I noted CM Ed Pollard’s prodigious fundraising, in which he amassed an amount that far outstripped his possible need for re-election in his district, and noted that he has been on some people’s lips as a possible candidate for Mayor. His January finance report does nothing to turn that speculation down, though also as noted before he may have his eye on some other prizes as well.

On the other end of that spectrum is the one person I had felt most confident about as a 2023 Mayoral candidate, and that’s City Controller Chris Brown, who seemed a natural fit for the Mayoral candidate role and who has demonstrated fundraising prowess in the past. Not these past six months, though, and his cash on hand total is looking awfully paltry. Does that mean anything? It’s too early to say. But now that John Whitmire and Chris Hollins are out there doing Mayoral candidate things, the time to decide whether or not one wants to join them in that is not far off. Michael Kubosh, who is currently doing Michael Kubosh things, falls in between the two of them in fundraising action. He’ll be facing the same decision as well.

A person who turned it up several notches after a sedate second half of 2021 is CM Sallie Alcorn, who was a top fundraiser for her initial election and now seems to be preparing for her second race. Note that in recent years, the old “blackout” period for fundraising was eliminated, so incumbents can get a head start on building up their treasuries. Fewer of them have need to do that now, as about half of them are term-limited. Some of those term-limited folks will be leaving with a decent amount of cash in their kitties – I’m thinking Dave Martin, Robert Gallegos, and David Robinson. It’s not clear to me what if any office they might use those funds for in the future – maybe one of them has an eye on Controller – but they have them if they want them.

Not much else of note. Greg Travis is now filing state reports, so he’s been swapped out for Mary Nan Huffman, who still has a few bucks in her account. I did not find a report for Tiffany Thomas. I’ll do HISD and HCC next to finish this off. Let me know what you think.

Republican County Commissioners ponder another quorum break

Sep 16th, 2021

by Charles Kuffner.

20 comments

It’s a thing they can do, and have done in recent times. They shouldn’t, not for this, but they can.

The three Democrats on Harris County Commissioners Court on Tuesday proposed cutting the overall property tax rate for the third year in a row, though the two Republican members left open the possibility they may force the adoption of a lower rate by skipping the vote in two weeks.

County Administrator David Berry warned that option would leave the county scrambling to pay for essential services, including debt service for the $2.5 billion flood bond program. Republican commissioners Tom Ramsey and Jack Cagle, however, see an opportunity to compel the Democratic majority to cut what they view as wasteful spending.

“We are having a budget challenge because of wasteful spending, not because of tax rates,” Ramsey said, citing the creation of new county departments and hiring outside consultants for various studies. “So, when we adopt a tax rate, it should be in that context.”

Each year, Harris County sets the tax rate for the county government, flood control district, hospital district and Port of Houston; the first three together comprise an overall rate that is used to calculate each property owner’s annual tax bill.

Berry proposed an overall rate of 58.6 cents per $100 of assessed property value. This would save the owner of a home valued at $200,000 with the standard 20 percent homestead exemption $27 since their last tax bill.

The three Democrats on Commissioners Court have expressed support for that rate.

Cagle’s pitch of 57.5 cents per $100 of assessed value, which included lower county and hospital district rates, would save this same homeowner $48.

The Precinct 4 commissioner said residents who still are struggling through the COVID-19 pandemic deserve more property tax relief.

“When we do the tax rate hearings, we need to be very careful that we make sure we don’t keep just the tax-spender mindset,” Cagle said. “The taxpayers, right now, are going through a rough season in their lives.”

[…]

The pair of Republicans have rare power over the tax issue because while they frequently are out-voted 3-2 by the Democratic majority on the court, Texas law requires a quorum of four members to set tax rates.

That means they simply can skip the Sept. 28 meeting when the vote is scheduled and thwart the Democrats’ plan; Cagle and then-commissioner Steve Radack did this in 2019 to block a tax hike the majority had proposed.

If the court does not approve new tax rates before Oct. 15, by law they revert to what is called the no new revenue rate, a steeper cut than even Cagle had proposed.

Berry said that would leave the county unable to fully fund the budget Commissioners Court unanimously approved in February. It also would constrain the county budget in coming years under a Texas Legislature-imposed revenue cap, which limits annual growth to 3.5 percent unless approved by voters.

“Over time, going to no new revenue rates are going to be very, very difficult for the county, given what we see in terms of rising health care and pension expenses,” Berry said.

He cautioned that reverting to the bottom rates would leave the county flood control district without enough to pay debt service on the bond program voters approved in 2018. That also could spook creditors and threaten the county’s robust AAA bond rating.

All five court members agree falling behind on debt payments would be foolish.

See here and here for more on the previous quorum break. If everyone agrees that a Cagle and Ramsey walkout would lead to a bad fiscal outcome for the county, then the very simple and logical solution is for them to not do that. They’re getting some of what they want, which is not a bad outcome for a political minority, and they have the option of campaigning for their alternate vision in an attempt to win back a majority position on the Court for next year. Done and dusted, let’s move on.

But if they choose to break quorum to force an even lower tax rate, in the name of “cutting spending”, then it is incumbent on the Democratic majority to respond. They can’t change the quorum requirement, which is a quirk of the state constitution, but like the Republican majority in the Legislature there are things they can do to make the price of breaking quorum higher. I would endorse two things to do in response: One, rewrite the budget so that the full cuts that would have to occur come entirely from Cagle and Ramsey’s apportionment. Do whatever it takes to make them feel the pain, since they were the ones who wanted the pain in the first place. And two, absolutely go for a maximalist redistricting map, to eject one of them from their current positions. Don’t play nice, don’t let bygones be bygones, just respond in kind and let them absorb the lesson that their actions have consequences. It’s basic stuff.

Now again, none of this has to happen. Commissioners Cagle and Ramsey can show up and vote how they see fit, and still get a lower tax rate even if it’s not as low as they would like. You can’t always get what you want, especially when you’re outvoted. Or they can go their own way and force their will onto the county, and see if the Dems have it in them to do payback. We’ll know on September 28 what they choose.

Flooding affects toll roads, too.

Sep 21st, 2020

by Charles Kuffner.

10 comments

This makes sense to me.

Commissioners Court on Tuesday voted to create a local government corporation to manage Harris County’s toll road system in a move expected to provide a windfall to county coffers and allow surplus toll collections to be spent on non-transportation purposes.

Approved by a 3-2 vote along party lines, the local government model would allow the Harris County Toll Road Authority to refinance its debt at historically low rates and divert funds to help the county respond to the COVID-19 pandemic and subsequent economic downturn, and invest more in flood control, supporters said.

Under the proposal by new Budget Director David Berry, the county will receive a $300 million lump sum in toll revenue and then $90 million annually from the system. The toll road authority collected $901 million in the fiscal year that ended in February.

Peter Key, interim executive director of HCTRA, urged the court in a memo to adopt the new governance model.

“This is an unprecedented situation that presents unique financial challenges for the county and may require additional levels of financial support for the county to effectively respond to these challenges for the foreseeable future,” Key wrote.

The toll road authority’s current bond indenture and state law limit the use of surplus revenues to non-toll roads, streets, highways and related facilities, according to a Q&A created by the county budget office. After refinancing under the new governance structure, HCTRA revenues can be used by other county departments.

The proposal would not affect toll rates, the budget office said, nor would it privatize the system or sell off any assets.

[…]

While Fort Bend, Brazoria and Montgomery Counties use local government corporations to finance and operate their toll roads, Harris County’s will serve as a financing vehicle only. The toll road authority estimates Harris County will save $60 million by refinancing the system’s roughly $2.7 billion debt at lower rates through the corporation.

County Judge Lina Hidalgo said she supported the idea because the county can “maximize every dollar” in a challenging fiscal environment.

Precinct 1 Commissioner Rodney Ellis said diverting some toll revenues would be an effective way to boost flood control spending. It also could be used as matching funds to state or federal appropriations on ambitious capital projects like deepening the Houston Ship Channel.

I’m fine with this. If the toll roads are generating more revenue than is needed to operate and maintain the roads, then sure, let’s use some of that money for other necessary purposes. Flood control would be high on my list, but other capital projects make sense, too. Commissioners Court will still be accountable for all this, as they currently comprise the board of this LGC, and they will be responsible for appointing subsequent board members. Let’s put this revenue to some good use.

(You may say, if the toll roads were bringing in such excess revenue, we should have cut toll rates. I say that’s a policy choice, and my preferred policy would be to do something like this instead. Lowering tolls is pretty far down on my priority list. Your mileage may vary.)

In the “Would you like some cheese with that whine?” department:

Both Republican commissioners voted against the proposal. Jack Cagle in Precinct 4 lamented the fact that there had been no public meetings on the topic before Tuesday’s vote, unlike the extensive campaign in the summer of 2018 seeking support for the $2.5 billion flood bond program.

Precinct 3’s Steve Radack derided the idea as a ploy by the court’s Democrats who, in his view, are looking to siphon money from the toll road authority instead of asking taxpayers for more.

“This is a money grab,” Radack said. “They’re going to use it to pay for things that are normally paid for via (property) taxes.”

Hey, remember when Commissioners Radack and Cagle broke quorum to prevent the democratically-elected majority on Commissioners Court from voting on a property tax rate hike that was intended to cover future downturns in revenue resulting from COVID-19 and the state’s rigid new revenue cap? Good times, good times. Maybe let the majority vote on its policies next time, and campaign against them on the places where you have disagreements? Just a suggestion.

Wait, you can’t cut that spending!

Aug 19th, 2020

by Charles Kuffner.

1 comment

This is the sort of thing you come up with when you’re out of other ideas.

Property tax revenue would be on the line for cities that choose to defund their police departments under a new legislative proposal pitched Tuesday by Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen.

“Any city that defunds police departments will have its property tax revenue frozen at the current level,” Abbott said, flanked by the other two Republican members of the “Big Three” in Texas state government. “They will never be able to increase property tax revenue again if they defund police.”

The proposal comes after the city of Austin last week unanimously voted to cut at least $20 million from the city’s police budget and earmarked an additional $130 million to potentially be reallocated to other departments. The Austin Police Department, with over 2,600 sworn law enforcement and support personnel, has had an annual budget of more than $400 million for the past two years.

[…]

It’s unclear how the legislation will define defunding police; Abbott, Patrick and Bonnen did not respond to questions requesting clarification. In Austin’s case, most funds will stay within city coffers but will address different needs.

Yeah, I’ll bet. This was the equivalent of the three of them ripping open their shirts and shouting “HULK SMASH!”, and it should be taken as such. Here’s what Scott Henson had to say.

Grits finds this bizarre on several levels. First, I thought conservatives believed revenue caps were a good thing, not a sanction applied to liberal cities for doing something they don’t like.

Indeed, I’m old enough to remember when conservatives favored less spending and smaller government. Now the governor wants to punish cities that reduce spending. We’ve passed all the way through the looking glass, it seems.

Austin cut its police budget by less than five percent. By contrast, Gov. Abbott, the Lt. Governor and the House Speaker recently told state agencies they all must cut their budgets by 5% because of declining tax revenue in the COVID era. Isn’t what’s good for the goose good for the gander?

Finally, cities around the state face budget shortfalls because of COVID combined with revenue caps the Legislature already approved. “Austin bashing” is one thing – folks in the capital city have come to expect that – but are you really going to punish every small town that must cut its police budget because tax revenue declined thanks to the virus?

Ten years ago, Texas Republicans were all about “less government” and “local control.” Now Abbott wants to micromanage municipal budgets to keep spending high. This debate is becoming downright surreal.

That’s one word for it. If you read that second link, you’ll find that most of what Austin did was move some functions out of the Police Department, thus requiring less money to be budgeted in that way, and deferred a cadet class until they revamp their training curriculum. That will likely have the effect of reducing headcount a bit in the short term through attrition, as they cut positions that are currently unfilled. It’s the most basic thing cities do, and they do it with other departments all the time.

But hey, it’s Austin, and thus Something Must Be Done, because [insert primal scream here]. I’m sure if Abbott proposed having the state fund the Austin Police Department as a way of ensuring that it never goes without ever again, Austin City Council would be willing to listen. Until then, my advice is for Abbott to resign his current position and run for Mayor of Austin. It’s clear that’s the job he really wants. The Current has more.

The rough fiscal road for school districts

Apr 25th, 2020

by Charles Kuffner.

Comments are off for this post

It’s gonna be bad. How bad remains the question.

Coronavirus already has wreaked havoc on school districts — closing campuses for the remainder of the school year, shifting learning online, and exposing a wide digital divide between students who have ready access to the internet and those who do not. And that is only this year.

Next year, even if the restrictions are lifted, the coronavirus still could spark a budget crisis for traditional and charter school districts across Texas.

School finance officials and state leaders already are warning that the economic disruption caused by the pandemic, coupled with the ongoing oil slump, could result in a plunge in state revenues as sales taxes drop and commercial property values slip. Texas Comptroller Glenn Hagar already has said the state is in a recession.

As districts work to finish their 2020-2021 budgets for approval this summer, Rep. Dan Huberty, R-Humble, said it would be prudent for them to squirrel away some money, even if it is too early to tell how much of an impact the pandemic will have on funding next year.

“Talking to superintendents, my message to everybody is, let’s get through this year, let’s get to summer time, and next session we’ll need to watch things very closely,” Huberty said.

[…]

[2019 school finance reform bill HB3] requires districts to base their upcoming budget on current year property values, instead of the previous year’s values. Districts receive a larger infusion of state money too, but the rate at which they can tax local property owners effectively will be capped by the state, said Catherine Knepp, an associate at the Moak, Casey & Associates school finance consulting group. How much local tax rates have to be lowered depends on the rate local property values rise and several other factors.

“Districts were still figuring out how to do that,” Knepp said, “Then enter coronavirus.”

For local revenues, Knepp said districts most likely to be impacted by the coronavirus closures will be those in which a larger share of their tax bases are commercial or industrial property rather than residential. About 60 percent of Deer Park ISD’s tax base, for example, comes from industrial properties that could suffer if the oil slump continues or if businesses there shut down entirely.

[…]

Huberty said the Legislature plans to save $1 billion of federal stimulus money for the next session to help fund schools and other parts of the state’s budget. Although it is too early to tell how much damage could be done as businesses and much of public life remains closed, he said money could be tight next session and said superintendents should begin looking where they could trim their budgets.

“The bones of what we put together with HB 3 remain intact, and we got some stimulus money from the feds to help us out with next year,” Huberty said. “But we’re going to have to look at everything.”

It’s a whammy from multiple fronts, as state revenue as well as local property tax revenues will be down, and the deep drop in oil prices will mean the Rainy Day Fund isn’t as topped up as it has been lately. On top of all that, when local revenues do start to recover, they will have to deal with the cap imposed by HB3. Which, as I understand it, does have an exception for things like epidemics, though who knows how that will play out. Even if everyone agrees to waive the restricting revenue cap, even the previously existing one could force tax cuts at a time when the districts are starved for funds. This will be an issue for multiple Legislatures, not just the 2021 Lege. It’ll also be a fine how-do-you-do for the TEA-appointed Board of Managers in HISD, whose first task (assuming they eventually get seated) will be dealing with the expected ginormous budget hole. Bet all those people who applied for the position a couple of months ago are having second thoughts now.

Cities and counties are going to need their own bailout

Apr 2nd, 2020

by Charles Kuffner.

6 comments

This story is about the rough financial future that the city of Houston faces as we go through the coronavirus shutdown, but it’s not just Houston that is in this position.

Mayor Sylvester Turner

As Mayor Sylvester Turner’s administration continues efforts to slow the spread of COVID-19 in Houston, another dire challenge looms for City Hall: its budget.

The economic downturn caused by the pandemic and plummeting oil prices has thrown an already cash-strapped spending plan into more arduous territory, raising the specter of the first furloughs or layoffs of city employees since 2011.

Controller Chris Brown, who recently finished a recession stress test for the city’s coffers, has said he thinks the situation is likely to rival the recession that began in 2008, approaching the test’s worst-case scenario: a budget deficit in excess of $300 million.

He told council members Tuesday they should begin dusting off the recession playbook.

“Unfortunately, they had to do some furloughs and cut some expenses and things like that, because you can’t control the revenue right now,” said Brown, the city’s independently-elected financial watchdog. “These are tough decisions that are going to have to be made, I think.”

Turner said budgeting is always difficult under a revenue cap, but the city in the past has forged its way through challenging deficits and will do so again.

The mayor would not say whether he thinks layoffs will be necessary, but he sees other actions that can help cut the deficit. Turner plans to use some of the city’s current fund balance, which is projected between $187 and $203 million. The rainy day fund, he pointed out, will also have $15 million when it comes time to adopt the budget.

Some job vacancies have already gone unfilled, he said.

“We always assume there is going to be a budget shortfall with the revenue cap,” Turner said, referring to Houston’s voter-imposed ceiling on increased property tax revenue. “There’s always some elephant in the room. The elephant here now is the coronavirus and the impact on your sales taxes.”

The city’s two largest streams of money are property and sales taxes. All eyes are on the latter, which are expected to take an unprecedented hit as most businesses have been ordered to close and the region’s residents have been told to stay home in a bid to slow the virus’ spread.

It’s not just sales tax revenue, which will hammer the state budget as well. No one’s flying into or out of the airports, no one is staying in hotels or renting cars or booking conventions. All of those things affect the enterprise fund, which is a part of the city’s budget that is largely not subject to the revenue cap. And as noted, it’s not just Houston. Every city, in Texas and elsewhere, will be facing this. Part of the solution here, very simply, needs to be a federal relief package for local and state governments, all of which would otherwise have to lay people off and drastically cut back on services, all of which would just further exacerbate the recessionary effects we are now feeling. Just as we expect business activity to more or less return to normal once everyone can leave their homes again, we should expect local tax revenues to more or less return to normal. All of that assumes that the business are still there to return to, which is why we needed the first stimulus bill, to prevent them all from suffocating in the meantime. We all want to return to normal, but we have to do everything we can to preserve what was normal until we can get back to it. That’s what the federal government can do, and what it needs to do.

But we should also recognize that forcing cities and counties and states to observe “balanced budget” requirements at a time like this is not only ridiculous, it’s self-mutilating. Mandating an artificial deadline for when one number must be shown to equal or exceed another is beyond stupid and pointless, and that’s even more so if we not-unreasonably assume that the feds will eventually come in with a check to make up for the sales taxes that did not happen. The single best thing Greg Abbott could do with his emergency powers once we’re at or near a point where we can begin to think about easing up on the stay-at-home rules is to declare that all “balanced budget” requirements are suspended for the next two budget cycles, along with the revenue cap that was passed in the last Lege. That won’t be carte blanche for cities and counties to start spending like crazy – they’ll still have to get their budgets to “balance” later on – it will just be a recognition that this was something entirely beyond their control, and they deserve a chance to recover from it. It won’t happen, of course – I’m sure Greg Abbott and the entire army of financial ghouls he has behind him are salivating at the prospect of forcing their local nemeses to slash their budgets – but it should. I will never stop beating this drum.

Coronavirus and the state budget

Mar 27th, 2020

by Charles Kuffner.

2 comments

Ain’t gonna be great. How bad, we don’t yet know.

Comptroller Glenn Hegar briefed Texas House members on the state’s economy and budget Sunday night, saying that while it was too soon for specific forecasts, both are expected to take potentially massive hits in the wake of the new coronavirus pandemic, according to multiple people who were on the conference call.

The members-only call, led by House Speaker Dennis Bonnen, R-Angleton, was one of state lawmakers’ first glimpses of the impact the virus is expected to have on multiple industries, state finances and Texas’ largely oil-fed savings account, known as the Economic Stabilization Fund or the rainy day fund.

Hegar, who referred to the state of the economy as “the current recession,” according to multiple people on the roughly hourlong call, predicted both the general revenue for the state budget and the savings account balance will be drastically lower — possibly by billions of dollars — when he makes a revised fiscal forecast. He said that update could happen in July.

Later Sunday, the comptroller’s office said that unless the Legislature spent money out of the savings account before July, the balance for the fund would be revised down, but not by more than $1 billion.

In October 2019, Hegar estimated that the state budget would have a nearly $3 billion balance for the fiscal 2020-21 biennium. The balance of the Economic Stabilization Fund, Hegar announced at the time, would be around $9.3 billion by the end of the 2021 fiscal year in August of that year.

[…]

Abbott, for his part, noted last week that he and the Legislature can tap into the state’s disaster relief fund immediately to help respond to the virus. He also said that the Economic Stabilization Fund could be used “at the appropriate time,” which he said would happen when state leaders “know the full extent of the challenge we’re dealing with.”

Before the stabilization fund could be used, Abbott would need to summon state lawmakers back to Austin for a special session before the Legislature reconvenes in January 2021. When asked at a town hall about the possibility for calling such a session, Abbott said “every option remains on the table,” while noting that there would not be any need for such an action if every Texan followed guidance to help curb the virus.

Obviously, the crash in oil prices doesn’t help the state’s financial picture, either. It’s sales tax collection that will really suffer, and that pain will be spread to the cities and counties as well. As always, the big picture here is “how long will this take” and “how many businesses and jobs will be lost in the interim”, and right now we don’t know.

I will say, situations like this are among the reasons why balanced budget requirements are such a bad idea. Let the state – and the cities – run a deficit for a year or two, rather than cut a bunch of programs and lay off a bunch of employees, both of which will exacerbate the effect of the overall downturn. I assure you, society will not crumble around us if we do that. We will see plenty of shenanigans pulled by legislators to worm their way around the balanced budget requirement, as we have always done. So why not be honest about it and just admit that the whole thing is a sham and we should just not worry about it, at least for this cycle? We can always get back to it next time. Much easier said than done of course – constitutions and charters can’t be so easily cast aside, which again goes to my point about why these things are stupid – but in a world where everything has been thrown into chaos, this just makes sense. Same for revenue caps as well – if the revenue for the state, or the city of Houston, falls ten percent this year, it will take three years under the existing 3.5% revenue cap just to get revenue back to existing levels, while forcing needless cuts in the meantime. It’s all a sham, we should seize the moment to recognize it for the sham that it is, and free ourselves once and for all from its ridiculous shackles. Won’t happen happen, but I’ll never stop pointing it out.

Next up for Mayor Turner

Dec 17th, 2019

by Charles Kuffner.

6 comments

A preview of his second term agenda.

Mayor Sylvester Turner

Mayor Sylvester Turner said he would seek to enact “transformational” changes in his second term, previewing an agenda that will require city leaders to confront politically difficult issues and vastly expand the use of public-private partnerships — a critical step for some of the mayor’s otherwise unfunded signature programs.

Fresh off his re-election victory over Tony Buzbee, Turner also spoke in new detail Sunday about his plans to restructure the fire department, accelerate the city’s permitting process, build a new theme park and intensify efforts to repair damaged streets.

“I said when I came in, in 2015, I wasn’t going to ignore things because they were not politically convenient. That has not changed,” Turner said in an interview with the Chronicle. “If I have to expend political capital to get some things done, that’s exactly what we’re going to do.”

Chief among Turner’s priorities, he said, is to improve Houston’s flood mitigation infrastructure and quicken the pace of recovery from Hurricane Harvey, which has lagged. The key flood control projects, Turner said, are the construction of new gates on the Lake Houston dam, detention basins in Inwood Forest, the North Canal Bypass channel and an underground detention basin south of the Memorial City area.

Three of the projects have received initial funding through a federal grant program that covers a large share of the cost, with only the underground basin awaiting approval.

More immediately, Turner faces a burgeoning flood control challenge in the General Land Office’s cap on how much Houston and other local governments may draw from a $4.3 billion federal mitigation aid package. Since Harvey, Turner has sparred over the recovery process with Land Commissioner George P. Bush and Gov. Greg Abbott, both of whom wield influence over how the resources are dealt.

Turner said he has no interest in “fighting somebody just to be fighting,” but stressed that he would push for Houston to receive a bigger chunk of the aid.

“I want to work with the governor and I want to work with the GLO, but when it comes to making sure that those dollars benefit people in Houston-Harris County that were impacted by Harvey and can be impacted by another storm, how do you justify a disproportionate amount of those dollars going to some other place?” Turner said. “I don’t think you can make that case.”

[…]

Next term, Turner also said he would look to restructure the fire department by switching from a four-shift to a three-shift work schedule, which is generally viewed as more arduous and is opposed by the firefighters union.

Turner affirmed that such a move would involve lobbying the Legislature to raise the baseline at which firefighters begin accruing overtime pay. Under state law, Houston firefighters begin collecting overtime pay when they work for more than an average of 46.7 weekly hours during a 72-day work cycle. Without the added overtime cost, firefighters in other cities often work 53- or 56-hour weeks, with many operating on a three-shift cycle.

Calling the department’s model “archaic” and “not reflective of the current needs,” the mayor contended that these changes would allow HFD to more efficiently handle calls classified as EMS. Those calls make up more than 80 percent of the incidents handled by the fire department, though the fire union has noted that a far lower share of the department’s “man-hours” are spent responding to EMS calls.

There’s a long list, and we didn’t discuss the plan for HERO 2.0, which will surely use some of that capital as well. If there was ever a time to make changes to how the Fire Department operates, it’s now – the firefighters went all in on beating Turner, and they lost. I foresee a rocky road with Harvey recovery money, because it’s more in Greg Abbott and George P. Bush’s political interests to clash with Turner over how the funds are doled out and managed than it is for them to play nice and get things done. For everything else, political capital has a shelf life. We’ll be talking about the next Mayor’s race before you know it. The more the Mayor can get done next year, the better.

City wins final judgment in revenue cap lawsuit

Nov 1st, 2019

by Charles Kuffner.

Comments are off for this post

Wow, is this ever a blast from the past.

The city of Houston has prevailed in a lawsuit challenging the amount it can collect in property taxes, ending 14 years of litigation over a set of measures approved by voters in 2004.

At issue in the suit were two ballot measures from 2004, specifically Proposition 1, which limited the annual increases in property tax and utility revenues to the combined increases in population and inflation for Houston, or 4.5 percent, whichever is lower.

Prop 1 was approved by voters in 2004, as was was another measure, Proposition 2, that further limited the city’s ability to collect revenue. The city, under then-Mayor Bill White, abided by the first measure because of a directive in it that stated whichever cap received more votes would be the one adopted.

Individuals from a conservative group then filed suit, accusing the city of violating the caps by not also adopting Proposition 2.

After years of court battles, a state district judge has ruled that the city has “fully complied” with Proposition 1.

See here for the city’s statement. The most recent update I can find in my own archives is from 2008 (!!), though it is likely there has been more action on the lawsuit that either wasn’t reported or went unremarked upon by me. However you look at it, this is some old, old business, and now it is done. Think of it as an alternate thing the city of Houston can celebrate now that the World Series didn’t work out the way we’d hoped.

Another ReBuild Houston lawsuit

Oct 26th, 2019

by Charles Kuffner.

7 comments

Gotta say, this puzzles me.

Mayor Sylvester Turner

A pair of Houston residents filed a lawsuit against Mayor Sylvester Turner and city council Monday, accusing them of failing to follow the will of voters who approved a charter amendment last year for funding drainage and street repairs.

The lawsuit accuses city leaders of shortchanging the dedicated drainage fund by failing to transfer the full amount required by last year’s ballot proposition.

The proposition, which essentially was a “do-over” vote on the city’s 2010 street and drainage repair program known as Rebuild Houston, requires the city to dedicate 11.8 cents of its property tax rate to the street and drainage fund. The city, under former mayor Annise Parker and Turner, has transferred less than the full amount generated by the 11.8 cents for the last five years.

The plaintiffs allege a roughly $44 million discrepancy in what the city currently has budgeted compared to the amount generated by 11.8 cents of property tax rate. Over 10 years, the funding shortfall could exceed $500 million, the plaintiffs say.

Turner’s office issued a statement disagreeing with the premise of the lawsuit, saying that transferring the full amount generated by 11.8 cents of tax rate would require moving some $50 million more annually and would “cripple” city services.

“That would mean cuts to essential services like police, fire, solid waste, and other services,” the statement said. “Mayor Turner doesn’t support that.”

The plaintiffs, Allen Watson and Bob Jones, are engineers who were part of the campaign that put the program, then known as ReNew Houston, on the 2010 ballot. It later was renamed Rebuild Houston.

They said they were suing because the city had failed to meet the expectations outlined in Proposition A, which 74 percent of voters approved last year. They are seeking a court order to force the city to direct more money and “to fund the things they said they were going to fund,” Jones said.

“Houstonians spoke loud and clear just one year ago when they voted to create a fund to fix our streets and drainage,” Jones said in a later statement. “…We are undertaking this suit to ensure that the law is upheld, that the promised funding is protected so that our street and drainage infrastructure receives the investment necessary to repair, replace and upgrade our street and drainage systems throughout the city over the next 20-30 years.”

Here’s what I wrote in 2018 about the ReBuild re-vote. You can click the links to the Chron stories, but there’s nothing in either of them that mentioned a percentage of property taxes. The story mentions this was a part of the original mix of funding for ReBuild Houston, and here I have to confess I don’t remember that. There was so much noise and drama about the drainage fee that anything and everything else got overpowered. If this is what’s supposed to happen, then the consequences will be unpleasant. On the plus side, maybe it’ll take another decade to get settled via the courts.

Cagle and Radack break quorum

Oct 9th, 2019

by Charles Kuffner.

2 comments

They did it.

Two Harris County Commissioners Court members skipped Tuesday’s meeting to prevent the Democratic majority from voting on a property tax rate hike that would increase revenue by 8 percent.

Republican commissioners Steve Radack and Jack Cagle were absent when County Judge Lina Hidalgo gaveled in the session at 10:03 a.m. A staff member for Cagle placed a two-foot stack of constituent comments at his place on the dais, indicating their widespread opposition to the tax increase.

Without a vote, Harris County will revert to the effective tax rate for the upcoming fiscal year, which will collect more than $195 million less than the rate Democrats had proposed, according to county budget analysts.

[…]

Cagle and Radack remained at large when their colleagues began discussing the tax rate at 11 a.m. In a statement, Cagle said he and Radack skipped the meeting to block an “unwise, unfair and unjustified” tax increase.

“The residents of Precinct 4 elected me to represent them. They did not elect me to lord over them or to repress them,” Cagle said. “This is the taxpayers’ money, not the government’s.”

See here and here for the background, and here for a statement from Commissioner Ellis. I will just say this: The people of Harris County, who voted 52-46 for Lupe Valdez over Greg Abbott, and 56-42 for Mike Collier over Dan Patrick, did not vote for the imposition of a restrictive and damaging revenue cap. Collier, for that matter, carried Radack’s precinct and came damn close in Cagle’s, so one could plausibly argue that their own constituents didn’t vote for that revenue cap, either. I can appreciate that Radack and Cagle opposed this plan and used the tool that was available to them to stop it, but they picked a really short-sighted hill to die on. The property tax system in Texas is rigged against homeowners, and Radack and Cagle’s fellow Republicans in the Legislature refuse to do anything about it. By this action, they demonstrate they are part of the problem. Commissioners Court can’t do anything about what the Lege has imposed on them now, but the voters can do something about Steve Radack next year. The Court has undergone a lot of change, but clearly more is needed.

Will Radack and Cagle break quorum to stop a tax rate hike?

Oct 8th, 2019

by Charles Kuffner.

9 comments

We’ll find out today.

Harris County Commissioners Court has scheduled a vote Tuesday to hike property taxes by 8 percent, though the two Republican members can thwart the plan by simply skipping the vote.

A quirk in the Texas Government Code requires a quorum of four court members, rather than the regular three, to vote on a tax increase. The rule affords Republican commissioners Steve Radack and Jack Cagle rare power, as they repeatedly have lost votes to their three Democratic colleagues this year.

The pair said they would not reveal their intentions ahead of the meeting.

First Assistant County Attorney Robert Soard said Radack and Cagle could attend the rest of Tuesday’s court meeting and leave the room when County Judge Lina Hidalgo decides to consider the tax increase.

“They can be present for part of the meeting and then leave,” Soard said. “That’s their option.”

Soard said that unlike the governor, Hidalgo has no power to compel any member to be present for a vote.

[…]

The Democrats on the Harris County Commissioners Court proposed a property tax increase of 2.26 cents per $100 of assessed value, which the county budget office estimates would add $37.65 to the tax bill on a $230,000 home in the first year. The county would collect more than $200 million in additional revenue.

Garcia said the prospect of Republicans skipping the vote was “disappointing but not surprising.”

“It is their responsibility to come to court and be a part of the process, even if they don’t agree with it,” he said in a statement.

The relationships between court members have been fraught at times since Democrats took control in January. Divided votes have become the norm, and commissioners sometimes snipe at each other from the dais.

See here for the background. The main thing I would add here is that the fraught-ness and the sniping and the divided votes are not because of some generic notion of “politics”, or incivility, or even partisanship, as former Judge Robert Eckels says. It’s about a sincere and significant difference in values and priorities. Which, to be fair to Eckels, is reflected in the differences between the two parties. The Republicans had their way for decades, and then the voters voted for change. That’s how this is supposed to work, minus the anti-majoritarian avoidance techniques. We’ll see what these two do.

Do you believe in magical thinking?

Sep 24th, 2019

by Charles Kuffner.

15 comments

I did not read this long profile of Tony Buzbee, because life is short and we all have better things to do. I did briefly scan the print version a bit, and in doing so I noticed the following paragraph, which tells you everything you need to know about Tony Buzbee, Loudmouth Rich Guy Who Wants To Be Mayor:

Buzbee opposes the idea of lifting Houston’s property tax revenue cap. Instead, he wants to enact budget cuts he says will fund his proposals, such as hiring 2,000 police officers in eight years — which would spike the department’s budget by almost 40 percent — and granting firefighters pay parity with police.

This is impossible. It literally cannot be done. Do you remember when Mayor Annise Parker was faced with a big deficit in 2010 following the economic crash, which caused property tax revenues to plummet? She ran on a promise of balancing the budget without making any cuts to the police or fire departments, and she achieved that in large part by laying off over 700 municipal employees. Someone with a more detailed knowledge of the current budget would have to run the numbers to check this, but to hire that many new police officers and give the firefighters a raise of that magnitude, I would question whether there are enough municipal employees left to lay off to pay for it. I mean, if we don’t want trash collection or a permitting department or building inspectors or anyone working in the parks and libraries – and maybe if we also defaulted on our bonds – you could make it work. I guarantee you, Tony Buzbee has not done the math to show how he could make it work.

On a side note, let me refer you to this:

Houston Police Officers’ Union President Joe Gamaldi questioned whether the department would even have enough cars, uniforms and equipment to handle the increased headcount.

“We would love to see that type of growth,” Gamaldi said. “But realistically, we’ve never hired more than 375 people in a fiscal year, so we would really need to look to see if HPD’s infrastructure can even handle that.”

Note that this story has Buzbee hiring those two thousand cops over his first four years. I mean, when the president of the police officers’ union says that your plan to hire 500 cops a year every year for four years is a bit much…

Other counties also considering property tax rate hikes

Sep 23rd, 2019

by Charles Kuffner.

1 comment

I have four things to say about this.

A statewide property tax relief plan that takes effect next year is prompting hefty tax increases this fall in many of the biggest cities and counties in Texas, even in places that have historically kept rates flat or decreased them.

Elected officials in some cities and counties say they have no choice but to raise taxes as high as they can this year to brace for the implementation of property tax reforms that Republican Gov. Greg Abbott and the Texas Legislature called historic earlier this summer. The average effective tax rate for single-family homes in Texas was 2.18 percent in 2018, third-highest in the nation, according to a study by ATTOM Data Solutions.

Starting next year, cities and counties will be barred from increasing property tax collections more than 3.5 percent in any year without a vote of the public. Currently, the state has an 8-percent limit, called the rollback rate, that state lawmakers say has allowed cities and counties to overtax homeowners. The lack of a state income tax makes Texas municipalities especially reliant on property tax revenue.

A look around the state shows many counties and cities are pushing rates to the 8-percent rollback rate this year to bank money or, in a few cases, even to fund pay raises for themselves, in reaction to the new law. El Paso, Harris, Tarrant, Webb and Travis counties are among those pushing to the current rollback rate, or near it. And cities including El Paso, Arlington, Corpus Christi and Austin are similarly considering rates at or near the 8-percent limit.

“I think a lot of cities and counties know that we are putting them on a diet and they are going on one last bender before it happens,” said State Rep. Dustin Burrows, R-Lubbock, who was a key player in crafting the property tax reforms as the leader of the House Ways and Means Committee.

[…]

In Harris County, which hasn’t raised the tax rate in decades, county officials say the state’s new restrictions are forcing them to react by raising the tax rate by 2.26 cents per $100 of assessed value. County Judge Lina Hidalgo said the county needs to create a contingency fund to ensure it can pay for services, such as health care, transportation and flood control, once the state’s 3.5-percent cap goes into effect. The rate increase, if approved next month, would allow Harris County to collect more than $200 million extra in tax money than last year.

1. There are some extremely bitchy quotes in the story from Sen. Paul Bettencourt, who pushed the bill that led to this in the Senate. I may have rolled my eyes so hard that they will never unroll.

2. The counties and cities that are considering this are acting in what they believe is their best interest, and the best interest of their residents. Plenty of expenses that counties and cities face, from disaster relief to health care to salaries and pensions, aren’t subject to any kind of rate limit. HB3 radically changed their long term financial picture. They had no choice but to adjust.

3. Just as a reminder, there are plenty of things the Legislature could have done to improve our property tax system without putting the squeeze on local governments. The Lege could also greatly help counties on the expenditure side of the balance sheet by expanding Medicaid, which would do a lot to reduce the cost of health care on counties. The whining from the likes of Bettencourt on this is just beyond rich. All that is without even pointing out that having a property tax-based system, in which the main expense is completely disconnected from people’s annual incomes, instead of an income tax-based system, is always going to have problems like this.

4. The same voters who will be given the power to approve or reject future tax collection levels also have the power to approve or reject the local officials who may be raising tax rates now ahead of that. They also have that power over people like Paul Bettencourt and Dustin Burrows and Greg Abbott and so forth. Maybe some day that power will be exercised.

Quorum question

Sep 20th, 2019

by Charles Kuffner.

5 comments

Who knew?

A quirk in Texas law could allow the two Republicans on Harris County Commissioners Court, despite being in the minority, to prevent the three Democrats from enacting a proposed property tax increase.

Typically, three court members constitute a quorum, the minimum number needed to conduct business. The Texas Government Code, however, requires four members be present to vote on levying a tax.

That exception affords rare power to Republican commissioners Steve Radack and Jack Cagle, who have been steamrolled on 3-2 votes on enacting bail reform, appointing a judge and a resolution on gun violence.

The pair simply would need to skip a tax hike vote to prevent the three Democrats from passing it, First Assistant County Attorney Robert Soard said. The trio on Sept. 10 proposed raising the overall property tax rate 2.26 cents per $100 of assessed value. The existing rate is 63 cents per $100 of assessed value.

“We don’t know how exactly it would play out,” Soard said. “But if there are not four members present, Commissioners Court can’t vote on a tax increase.”

A final vote is scheduled for Oct. 8, and the deadline to set the county tax rates is Oct. 11, leaving the Democrats with little margin for error. Commissioners Court has scheduled public hearings on the proposal on Sept. 20 and Sept. 24.

Radack pointed out that he has not missed a meeting in more than five years, and said Oct. 8’s session is marked on his calendar.

Cagle, through a spokesman, said he has made a decision on the issue but does not want to share his strategy publicly. Cagle proposed a compromise at the Sept. 11 meeting, only increasing the flood control district rate, but his motion was defeated on a party-line vote.

[…]

The proposed property tax increase, which would be the first increase since 1996, would collect more than $200 million in additional revenue over the current rate. Hidalgo said the measure is necessary to ensure the county can continue to pay for services, including billion in flood control projects, after the revenue cap passed by the Legislature takes effect next year.

That cap limits year-over-year growth of city and county revenue to 3.5 percent, down from a previous ceiling of 8 percent. Revenue increases above that threshold would need voter approval.

The county budget office estimates the average Harris County homeowner’s tax bill would increase by $38, based on a home valued around $230,000.

You have to love an anti-majoritarian law. I had no idea this existed, but I can’t say I’m surprised. Let’s please dispense with this nonsense about Radack and Cagle being “steamrolled”, however. They’re on the losing end of majority votes. That’s how this is supposed to work.

The story notes that Rodney Ellis participated in a big quorum break in 2003, while he was in the State Senate and was trying to hold off the Tom DeLay re-redistricting effort. The Senate quorum-busting, which lasted for weeks while Ellis and his Democratic colleagues holed up in New Mexico, followed a similar effort by 51 Democrats in the House. This is fair to bring up. I will note that in these cases, the threshold for a quorum in each chamber was set by the rules they adopted at the beginning of the session, not by state law, and that one of the things that happened as a result of all this was that the quorum rules were changed to make this kind of exercise futile. Also, the reason that Ellis and others fled the state is because the DPS is authorized to round up wayward members and drag them back into the chamber for the vote they’re trying to scuttle. Whether the DPS has the power to place quorum-busting legislators under arrest was unsettled the last time I checked on it, but I feel confident saying that if Radack and Cagle try this, they will not be hauled back downtown in handcuffs by Sheriff’s deputies.

As to the matter of the tax rate increase itself, this is something that Judge Hidalgo and Commissioners Ellis and Garcia think is necessary to enable the county to pay for the things it needs to do, including flood mitigation. They are concerned that thanks to the revenue cap provision of HB3, the county will be hamstrung going forward, forced to implement rate cuts because the county’s growth has been too fast for the law, so they’re taking action to mitigate against that now. You can certainly disagree with that, and you can express that at the next Commissioners Court meeting and at the ballot box. I’d just note that if the Legislature had left the county to its own devices, this wouldn’t be happening now.

On to the next big financial issue for the city

Aug 18th, 2019

by Charles Kuffner.

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It’s always something.

Mayor Sylvester Turner

Four years ago, the main source of Houston’s deteriorating financial health — billions of dollars in unfunded pension obligations — loomed over the race for mayor, promising a massive test for the winner.

Now, Mayor Sylvester Turner, having overhauled the city’s troubled pension systems, is running for re-election and touting the reforms as his signature policy accomplishment. He faces several challengers, including Bill King, the businessman he defeated four years ago, millionaire lawyer and self-funder Tony Buzbee, City Councilman Dwight Boykins who has clashed with the mayor over firefighter pay and former Councilwoman Sue Lovell, as well as a handful of lesser known candidates.

Whoever wins will be forced to confront another simmering financial problem: Houston’s $2.4 billion unfunded liability for retiree health care costs, the result of years of deferred contributions, an aging city workforce and, experts say, growing medical costs that outpace the city’s revenue.

The total has grown in recent years by an average of $160 million a year, or more than $400,000 a day. That is less than the $8.2 billion unfunded pension liability’s $1 million-per-day growth rate, but enough to require swift and sweeping changes, experts and local officials say.

“We’re in the earlier stages in this. It’s not a crisis by any means, but it would be better to address it now,” Controller Chris Brown said. “We don’t want to let this thing grow to another $8 billion unfunded liability. … Let’s pay a little now instead of paying a lot later.”

The unfunded liability refers to the city’s obligations in the coming decades for retired employees’ medical, life and prescription drug insurance, commonly called other post-employment benefits, or OPEB. Houston has covered its OPEB expenses through a pay-as-you-go system, akin to making a minimum credit card payment while the balance grows.

[…]

“We have also been in discussions with the employee groups working toward consensus, while keeping in mind the sacrifices employees have made to help us achieve the city’s historic pension reform,” Turner said.

The proposals align with recommendations from a separate firm, Philadelphia-based PFM, which said in its 10-year Houston financial plan the city should eliminate OPEB coverage altogether for retirees or dependents who have access to other coverage.

Other cities have taken a similar approach, limiting cuts for retirees and older employees who were promised certain benefits, while requiring bigger sacrifices from younger and future employees with more time to prepare.

The good news here is that the city doesn’t need to go through the Lege to fix this, and the basic plan for a fix is already in the works. Mayor Turner will be proposing his plan later in the year, and most likely that will put the city on a path towards containing this problem. There’s still a big piece of the puzzle missing, though.

Even after reigning in the city’s OPEB liability, Brown said, the city faces numerous looming financial problems, including annual deferred maintenance and, in the recent city budget, recurring spending that outstrips recurring revenue. In addition, Houston has been operating under a voter-imposed cap on property tax revenue since 2004 and has trimmed its tax rate to avoid collecting more money than allowed.

“This is another piece of the larger problem that’s looming for the city of Houston, which is the structurally imbalanced budget,” Brown said. “Essentially, we want to be paying for all of our current expenses in the fiscal year in full. And we don’t want to defer anything out, i.e. kick the can down the road.”

Yes, the revenue cap, which costs the city many millions of dollars for no good purpose. There’s a lot the city can do to control costs, but not everything is within its power. Some things just get more expensive over time, and if the city is not allowed to reap the benefit of economic growth, it cannot deal with those expenses. If we can get past this issue, and Mayor Turner gets re-elected, then maybe, just maybe, we can get a rev cap repeal measure on the 2020 ballot. There will never be a friendlier electorate to deal with t.

Ed Emmett is not a fan of SB2

Jul 10th, 2019

by Charles Kuffner.

5 comments

So he opines.

Ed Emmett

At its core, SB 2 continues state leaders’ war against local governments. For years local governments have had to make up for the state’s underfunding of public education. But the state’s top elected officials, Gov. Greg Abbott and Lt. Gov. Dan Patrick, didn’t want the public to understand that those state budget decisions were the main reason property taxes were going up. So they criticized city and county policies.

In its final form, SB 2 limits revenue growth from property taxes for cities and counties to 3.5 percent annually. School districts are limited to 2.5 percent, although implementation for school districts is delayed for two years so that for now, the state won’t have to pay an even higher share.

The bill fails to recognize that Texas counties differ widely, so an arbitrary, one-size-fits-all approach is bad policy for a county such as Harris, where almost 2 million people live in the unincorporated part of the county and so rely on county government to provide roads, flood control, parks and other infrastructure — as well as law enforcement.

To make matters worse, the state has saddled counties with unfunded mandates, particularly in criminal justice and courts. The bond rating agencies have already issued warnings that the legislation might cause Texas local governments’ credit ratings to be downgraded, which will increase the amount of interest that taxpayers pay.

So when county services or infrastructure lag behind growth, don’t blame county government. Blame the state officials who supported SB 2.

Beyond the impact on local governments, SB 2 is actually bad for homeowners because it keeps in place a complicated, convoluted property tax system. The big winners from the so-called property tax reform are property tax consultants and their clients.

It is not a coincidence that the author of SB 2, Sen. Paul Bettencourt, makes his living as a property tax consultant. Bettencourt even had the audacity to advertise his services on the radio during the legislative session while SB 2 was being considered.

Sick burn, y’all. There sure is a certain freedom in not having to run for re-election. Emmett is of course correct about the main purpose of SB2, but let’s not overlook the side benefit.

The real goal of SB2

Jun 30th, 2019

by Charles Kuffner.

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Let’s take a look at the quotes from the supporters of SB2, the new law that will impose revenue caps on all Texas cities, to see what they say about it.

“They’re going to have to start looking at spending this money like it was their own and not somebody else’s money,” said the bill’s sponsor Sen. Paul Bettencourt, R-Houston. “And they’re going to have to look at priorities.”

[…]

But Ellen Troxclair, senior fellow at the Texas Public Policy Foundation and former Austin City Council Member, said those dire warnings imply a city has no control over its spending.

The reason this bill was one of legislators’ top priorities this year, Troxclair said, is because Texans are frustrated by rising taxes, and if it forces cities to rethink their spending, that’s a positive.

“The bottom line of SB 2 is it brings the rate at which cities are spending money more in line with the people’s ability to pay,” Troxclair said. “I hope that what the cities do is hear the pleas from citizens who elected them to make more responsible decisions when it comes to spending.”

Troxclair added that the bill doesn’t stop cities from going to taxpayers and asking to raise their taxes above 3.5 percent if officials deem it necessary.

[…]

Austin and San Antonio, which both have the highest credit rating of AAA, are also concerned that the caps will have an effect on their ability to borrow. The nation’s three major credit rating agencies have warned that the caps could have a negative impact.

Bettencourt and Troxclair, however, dismissed those concerns, saying that as long as cities are being fiscally responsible, credit rating agencies will have no reason to dock their scores. Bettencourt added that SB 2 doesn’t affect the debt portion of the tax rate, which are set by bond elections.

SB2 was sold as a way of reining in property taxes, to provide savings to homeowners. (Renters are on their own, the Republicans don’t care about them.) But no honest broker actually believes there will be any real savings. Literally no one is going to review their household expenses at the end of a year and say “thank goodness for that revenue cap, it saved us so much money”. Just look at the Houston experience, in which the typical reduction in taxes is less than $100 per year, while the city has been starved of revenue. The whole point of this exercise to to constrain cities’ ability to prioritize its spending needs, because with a revenue cap property tax reduction, no matter how trivial, always comes first. Paul Bettencourt and his cronies want cities to spend less. If that means laying off employees, if it means deferring maintenance and repairs, if it means not offering new services to meet the needs of a changing and growing population, that’s too bad. Or not bad at all, from his perspective, because what does he care about any of that? He wants government at all levels to spend less – more specifically, to spend less on things he doesn’t like – and SB2 will help accomplish that goal. Mission accomplished.

Houston’s up-and-down population growth

May 30th, 2019

by Charles Kuffner.

2 comments

It was up and now it’s down.

San Antonio gained 24,208 residents between July 1, 2016, and July 1, 2017, annual population estimates just released by the federal agency show. That amounts to an average of 66 people per day, the Census Bureau said.

The surge pushed the city’s population above 1.5 million for the first time. That marks an increase of almost 185,000 people in the city limits since the 2010 census.

San Antonio remains the seventh-largest city in the country. Its latest population estimate is 1,511,946.

[…]

By contrast, growth in Houston, which just a few years ago seemed poised to take over Chicago’s position as the third-largest city in the U.S., has hit a snag with fewer and fewer people moving there.

Houston added just over 8,000 residents, placing it seventh in growth among other Texas cities like Austin, Fort Worth, Dallas and San Antonio.

For five consecutive years from 2011 to 2015, Houston remained in the top three cities that had added the most people. But now the Bayou City — known for its sprawl and elastic economy — has fallen behind a trend that began in 2016 when Houston first showed signs of slowing down. The city recorded four consecutive years of averaging more than 30,000 new residents between 2011 and 2015.

[Texas State Demographer Lloyd] Potter says the substantial change in Houston growth is perplexing.

No demographic breakdown is available for the city population data just released, so there’s no way to know the ages, races, ethnicities or genders of San Antonio’s or Houston’s newest residents.

Couple things here. These are estimates based on available data, not on a count. They’re usually pretty good, but they’re not the official Census totals like what we will get next year, and they can be off by some amount. This is one reason why getting the most thorough and accurate count we can is so important, because every resident we overlook results in lost resources for the city. There’s no obvious reason for the deceleration – it could be just a blip – and it’s too soon to call it a trend, but it definitely bears watching.

Because, of course, Houston’s population growth affects its finances in more ways than just Census apportionments. The dumb and arbitrary formula used in the revenue cap combines population growth and inflation rate to set a limit on how much of a revenue increase the city is allowed to have. It doesn’t matter if new things are being built and old things are being renovated and upgraded, either we fall below the limit set by this number cooked up by the likes of Paul Bettencourt and Bruce Hotze or we are forced to throw away a few million dollars via a property tax rate cut that no one will notice. The whole point of the revenue cap is to constrain the city’s ability to provide services. It’s stupid policy pushed by people who did not and do not have Houston’s best interests at heart. And it has us stuck hoping this slowdown in population growth is just an aberration, because it will increase the pressure on our city finances if it is not.

Appeals court affirms pension bond lawsuit

May 26th, 2019

by Charles Kuffner.

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Hope this is now over.

Mayor Sylvester Turner

The Texas 1st Court of Appeals has struck down an appeal from a Houston businessman who contested the city’s 2017 pension bond referendum, appearing to end the legal challenge that began almost a year and a half ago.

Mayor Sylvester Turner’s office had denied former housing director James Noteware’s allegation that the mayor misled voters into approving the $1 billion bond sale with a “materially misleading ballot description.”

Noteware claimed that the election authorized the city to pay off the bonds by levying a tax that exceeds its voter-imposed revenue cap.

A state district judge last year dismissed Noteware’s claim without ruling on his motion for summary judgment in the case.

In the ruling, the judge agreed with the city’s argument that the court lacked jurisdiction because Texas Attorney General Ken Paxton had issued an opinion approving and validating the bonds, while Noteware’s claim “depends on contingent or hypothetical facts.”

See here, here, and here for the background, and here for the ruling. Noteware’s claims are summarized in the Chron story, while the city countered that 1) the Attorney General certified the bonds as being in compliance with the revenue cap; 2) the election was held, the bonds were sold, and the taxes to pay for them were levied, so there’s no action for the court to take; and 3) any claim that payment of the bond may violate the revenue cap in the future cannot be litigated now. The court accepted the city’s arguments and the appeals court upheld the ruling. Based on this ruling, it’s theoretically possible there could be future litigation over that last point, but if so it will most likely be someone else’s problem.

More info on the school finance bill

May 25th, 2019

by Charles Kuffner.

1 comment

Here’s what we know.

Before final negotiations, the House’s version of HB 3 cost $9.4 billion, and the Senate’s cost a whopping $14.8 billion, according to Texas Education Agency calculations. The final cost is around $11.6 billion, according to lawmakers, though an official cost analysis has not been made public.

The House wanted to raise the base funding per student from $5,140 to $6,030, while the Senate wanted to raise it to $5,880. They decided on an even higher number of $6,160.

Both chambers had previously agreed to spend $6.3 billion on public education, including salary increases for teachers, and $2.7 billion for property tax cuts. This final bill appears to include about $6.5 billion for public education, including extra raises and benefits for school employees, and $5.1 billion for tax cuts.

Lawmakers estimated the negotiated version of the bill would lower tax rates by an average of 8 cents per $100 valuation in 2020 and 13 cents in 2021. That would mean a tax cut of $200 for the owner of a $250,000 home in 2020 and $325 in 2021. Legislators also said it would increase the state’s share of public education funding to 45% from 38%. They said it would lower school districts’ cumulative recapture payments, which wealthier districts pay to subsidize poorer districts, by $3.6 billion over two years.

[…]

In the negotiation, lawmakers also decided to drastically change the formulas that determine how local and state funding is allocated to school districts — taking heavily from the Senate’s school finance proposal.

The House had proposed a decrease in school district tax rates by 4 cents per $100 valuation statewide, as well as a mechanism to further decrease higher tax rates. State Sen. Larry Taylor, R-Friendswood, unveiled a version of HB 3 near the end of April — relatively late in the legislative process — that included billions of dollars to lower rates by about 15 cents per $100 valuation, more than either chamber had budgeted.

The negotiated bill lowers tax rates statewide by 7 cents per $100 valuation, with the potential to go lower in future years. That’s a $175 annual cut for the owner of a $250,000 home, not counting other mechanisms in the bill to lower tax rates further.

According to lawmakers, HB 3 includes about $5.1 billion for school district tax cuts — again, more than the initial budget proposal of $2.7 billion. Some of the additional money comes from a new fund established to pay for those cuts. The state comptroller is required to deposit some money from the Available School Fund, which provides funding for schools derived from state-owned land and fuel taxes, and some money from an online sales tax into the new fund.

It is not immediately clear exactly what other sources of money contribute to cuts this biennium or how lawmakers expect to pay for tax cuts in the future. The bill requires the state’s nonpartisan budget board to study potential sources of money for future school district tax cuts and their anticipated impacts on taxpayers, schools and the state.

There’s more, but it doesn’t really answer my initial questions. I hope someone I trust who knows this stuff well comes forward with an analysis, because this is big stuff and it’s going to get passed in the next day or two without a whole lot of public vetting.

Also, too, there are the property tax changes.

In its final form, Senate Bill 2, the reform package, appears to have changed little from when it passed out of the House earlier this month on a 109 to 36 margin.

If signed into law, the measure would require cities, counties and emergency service districts to receive voter approval before raising 3.5% more property tax revenue than the previous year. Community colleges and hospital districts will need to hold an election before surpassing 8% property tax revenue growth.

The constraints only apply to revenue collected on existing property, not new developments.

School districts appear to have been carved out of the bill, but their tax revenue increases are constrained in a high-priority public education bill, House Bill 3. That legislation could lower school tax rates by an average of 8 cents per $100 valuation in 2020 and 13 cents in 2021. For the owner of a $250,000 house, that could yield a tax cut of $200 in 2020 and $325 in 2021.

Currently, taxing units can raise 8% more property tax revenue before their voters can petition to roll back the increase. The 8% figure was set during a period of high-inflation in the 1980s.

The final version of the bill, now titled the Texas Property Tax Reform and Transparency Act, appears to have several provisions intended to add flexibility around the reduced election trigger.

Some of the money taxing units spend providing indigent defense attorneys and indigent healthcare would not be factored into the revenue growth calculation. Taxing units would be able to bank unused revenue growth for three years, allowing them to exceed the 3.5% threshold in some of them. And tax districts can raise $500,000 without having to hold an election, as long as that increase does not exceed 8% revenue growth.

Again, what I really want to know is how this will affect the big cities like Houston, because we’ve had a big target on our backs this session. Thankfully, some of the nastier bills did not survive, but cities’ revenues have already been reduced, for no obvious reason. I just want to know at this point how much worse things will be. And how it will change in the coming years.

A tale of screwed cities

May 15th, 2019

by Charles Kuffner.

1 comment

That’s my unofficial title for this legislative session.

The interest group representing Texas cities used to be one of the most powerful legislative forces at the Capitol. This session, it has become the GOP’s most prominent adversary.

Its members have been harangued at hearings. Targeted by a proposed ban on “taxpayer-funded lobbying.” And seen multiple proposals sail ahead over its protests.

When, around March, one mayor inquired about the reasoning for a controversial provision in a property tax bill, he said an advisor to Gov. Greg Abbott suggested, “you reap what you sow.”

The message was clear, said McKinney Mayor George Fuller: Local officials had been obstructionists in the past.

Though the antagonistic relationship between Texas cities and the state has been building for years, this session has reached the fever pitch of all out legislative assault, said Austin Mayor Steve Adler, in April. Typically, the Texas Municipal League tracks bills it opposes that are gaining momentum in the Legislature. This session, the group had amassed more than 150.

Among them, was a cable franchise fees bill authored by state Rep. Dade Phelan, a Beaumont Republican and chair of the powerful State Affairs Committee. After the Texas Municipal League warned its members the proposal could cut into cities’ revenue, Phelan had a concise response for the group, which represents 1,156 of Texas’ roughly 1,200 cities.

“When you are in a hole — you should stop digging,” Phelan recommended, in an email obtained by The Texas Tribune.

In an interview, Phelan said he harbored no animus toward the organization, but took umbrage with its opposition to legislation his constituents want. The sentiment is widely-shared in the Legislature, Phelan said, as evidenced by the support the bills on taxpayer-funded lobbying and franchise fees have garnered.

“Those bills have never gotten out of committee before,” he said. The Texas Municipal League represents “their own interests and we are representing the taxpayers.”

“I think there’s a disconnect sometimes,” he added.

The group’s leaders see a different trend. They say model legislation with an anti-city bent has been exported from conservative think tanks and taken root at statehouses across the country. At the same time, Republican strongholds have shifted to the suburbs, making progressive city leaders convenient whipping boys for politicians from the president on down.

There’s more, so go read the rest. It really does boil down to two things. One is the Republicans’ refusal to address our tax system in a meaningful way. There are things we could do to make the property tax system more equitable. There are things we could do with sales taxes to bring in more revenue in a way that wouldn’t be so regressive. Our whole tax system is a byzantine mess, but the only thing that we’re allowed to talk about is cutting property taxes. This session that means putting the screws to cities, even though local property taxes aren’t driving the growth of property tax collections. The Republicans are looking for a political solution, and cities are a convenient target.

Which leads to point two: Cities are liberal and Democratic, so it’s a twofer for state Republicans to stick it to them. And don’t think that having a Republican mayor would change anything:

“I understand the political atmosphere to reduce taxes; there’s no one that would be more aligned with that than I am,” said El Paso Mayor Dee Margo, a former Republican state lawmaker. “But I’m also trying to deal with basics. I say I’m the mayor of public safety, potholes, and parks.”

El Paso’s property values — and so its tax base — is growing at a slower clip than other parts of the state, he said. Though the factors differ from city to city, each municipality has different needs and budgets, and local leaders say they are unaccounted for under a blanket property tax reform policy.

“The frustration is that we are grouped, coupled with across-the-board perceptions,” Margo said.

That’s because your Republican former colleagues don’t care about any of that, Mayor Margo. The only way forward here is to vote them out.

Mediation fails to achieve Prop B agreement

May 5th, 2019

by Charles Kuffner.

Comments are off for this post

I have three things to say about this.

Houston Mayor Sylvester Turner on Friday said a court-appointed mediator has declared negotiations between the city and firefighters union over the implementation of Proposition B at impasse, potentially leaving the future of the measure in the hands of a state district judge.

The announcement ends what had appeared to be some progress toward resolving the months-long dispute over how to phase in raises to firefighters required by the pay parity measure voters approved last November. The charter amendment requires the city to pay firefighters the same as police of corresponding rank and experience.

[…]

State district Judge Tanya Garrison had ordered the city, firefighters and the Houston Police Officers Union into non-binding mediation three weeks ago. Garrison’s order came as part of a legal battle between the three sides over the constitutionality of Prop B; she declined to rule on that issue until the three parties reached a settlement on implementation or an impasse was declared by the third-party mediator.

The three groups had met at least three times since.

At issue is how to implement the raises. The fire union has said it would ask its members to consider a three-and-a-half-year phase-in as long as no firefighters are demoted or laid off. Turner had said the city cannot avoid layoffs unless Prop B raises are phased in over five years.

At a Friday morning press conference, however, Turner said the city had agreed to the fire union’s previous offer to phase in the raises over three and a half years, with no firefighters demoted or laid off.

Turner said the union then refused to accept that agreement, as well as another offer that would have given it hundreds of millions of dollars in a block grant-like arrangement that the union could use at its discretion.

He accused the union of repeatedly “moving the goal posts,” and said that agreeing to its full demands would devastate Houston’s finances and credit rating.

“The city cannot go beyond what we have proposed without bankrupting the city,” he said. “As long as I am mayor, we are not going to bankrupt this city. Everyone in the city would pay the price.”

Mediator David Matthiesen did not respond to a request for comment Friday.

In a statement, the fire union said it had agreed to take a four-year phase-in to its members if pay parity was implemented “effective immediately,” the city agreed to no layoffs and if the city disclosed “what each firefighter will earn in salary and incentive pay.”

HPFFA President Marty Lancton also said the city demanded in negotiations that Prop B be rescinded and declared unconstitutional, a request he adamantly opposed.

“Citizens’ rights to petition the local government must be protected,” he said.

1. You really have to admire Marty Lancton’s ability to keep the focus of this debate on one point, which is the pay raise that the voters agreed to give the firefighters. The fight here is not over whether or not to implement Prop B, it’s over how to do it. That’s what the mediation was about, that’s what the layoffs are about. The firefighters don’t like the way the city is implementing Prop B and have been complaining nonstop – and very successfully, at least from a short term political perspective – about it. Their grievance is that some firefighters will be laid off, and some others demoted, in order for the city to pay for Prop B. If the city had decided instead to lay off police officers, solid waste workers, and more municipal employees instead, there’s nothing in the firefighters’ rhetoric to suggest they’d have had a problem with that. Beyond the fact that it was clear from the beginning that the city could not afford Prop B, this right here is why I don’t have much sympathy for the firefighters.

2. That said, part of the litigation that was brought by the police officers’ union was a claim that Prop B is illegal and should be invalidated by the court. The argument here is that the pay parity law conflicts with state law about collective bargaining. I Am Not A Lawyer, and I have no insight into that question. I had thought originally that the litigation over Prop B would follow the template of previous lawsuits over city referenda and be about ballot language. I was wrong about that, which is why I like to emphasize my not-a-lawyer status in these matters. Be that as it may, it seems like a big stretch to get an election overturned. I will be surprised if Judge Garrison (who, full disclosure, is a friend of mine) rules for the plaintiffs. But again, I Am Not A Lawyer, so place your bets at your own risk.

3. The last couple of paragraphs in this story are about how the people other than Sylvester Turner who are running for Mayor are also critical of his handling of Prop B implementation, without a single word being quoted about what these alternative Mayors think should be done instead. They don’t like what the Mayor is doing, they oppose what the Mayor is doing, but what would they be doing if they were Mayor? You cannot tell from reading this story. Perhaps the reporter chose not to include what they said about that, perhaps the story editor excised it for space, or perhaps none of them had anything useful to say on the topic. You can probably guess which one I think it is.

School finance and property tax update

Apr 30th, 2019

by Charles Kuffner.

1 comment

From last week.

Rep. Dustin Burrows

Blasting the Senate for taking a symbolic approach on school district taxes, a panel of House lawmakers heavily altered then approved the upper chamber’s version of priority property tax legislation late Thursday. And committee members pointedly included a provision meant to rebut claims that they were not committed to wholesale reform.

The chair of the tax-writing Ways and Means committee, state Rep. Dustin Burrows, said the House had kept a provision in Senate Bill 2 that attempts to constrain school district property taxes. While he and finance experts have said the language needs to be addressed in the Education Code, there “is an intent in the Senate to symbolically express that they are committed to lowering school property taxes,” Burrows said.

“Well, because of that, I want to make sure that the House also expresses its full commitment to lowering people’s property tax bills related to schools,” the Lubbock Republican said.

The Senate had tried to limit schools’ tax rate increases to 2.5%, without an election.

“We actually used a 2.0 number,” Burrows said, “to show that the House is equally as committed to doing significant things this session for the property taxpayers of the state of Texas.”

The insertion of the 2.0 figure may be a dig at hardline conservatives and Senate lawmakers, who have suggested the House gutted its own property tax reform package when they removed school district language from it in March. The lower chamber’s approach, however, has earned the backing of experts who say a separate public education bill is the most feasible way to make changes to the school finance system.

“To do property tax reform for schools, you really have to do it in the Education Code. I think that all of the experts agree,” Burrows said. “This bill has never touched the Education Code. It can’t touch the Education Code, that is House Bill 3,” he said, referencing the lower chamber’s omnibus school finance package.

As adopted in a 8-3 vote Thursday, SB 2 now closely resembles House Bill 2, a companion measure passed by the House committee last month — even taking on the same name: The Texas Taxpayer Transparency Act. The Democratic vice chair of the committee, state Rep. Ryan Guillen, joined Republicans in support of SB 2’s passage Thursday.

In the latest version of the bill:

Cities, counties and emergency service districts must hold an election if they wish to raise 3.5% more property tax revenue than the previous year

Those entities can increase their property tax levies by $500,000 a year, without triggering an election

Other taxing units — namely, hospital districts and community colleges — remain at an 8% election trigger, with Burrows’ citing the inflation of medical and education expenses

Homestead exemptions offered by local municipalities can be factored into the revenue growth calculation, preventing cities and counties from being penalized if they offer their residents tax reductions

A five-year carry-over provision lets taxing units bank unused revenue growth

[…]

A final change Thursday makes passage of SB 2 contingent on HB 3’s approval.

“These two are tied together,” Burrows said.

See here for more about HB3, and here for more on SB2. Ross Ramsey gets into the politics of the moment, which includes the Republican leadership’s continuing fealty to the property tax for sales tax swap that isn’t going anywhere. It’s hard to compare, because each session is its own story, but it sure feels to me like not a whole lot has happened so far, with less than five weeks to go. The big ticket items dragging along and seeming to go nowhere isn’t unusual, but what else has even made it to the floor of the other chamber? Not that I’m complaining, mind you, I’m just curious. Word is that SB2 will be up in the House today, so we’ll see how it goes. There’s still a wide range of possible outcomes.

What will Council do about Prop B layoffs?

Apr 17th, 2019

by Charles Kuffner.

2 comments

We’re gonna find out.

Mayor Sylvester Turner told the Houston fire union Monday he would provide it with financial data leaders requested, a sign of progress at a critical point in negotiations between the mayor and union to phase in Proposition B raises for firefighters.

Officials from the Houston Professional Fire Fighters Association have asked Turner to open the city’s books, allowing firefighters to verify that the mayor’s offer to phase in the pay raises over multiple years honors the terms of the charter amendment, which requires the city to pay firefighters the same as police of corresponding rank and seniority.

Turner’s refusal to do so has been a key sticking point preventing a deal, union President Marty Lancton said.

The development comes two days before Houston city council is scheduled to consider a measure to lay off 220 Houston firefighters, which Turner has said is necessary to offset the cost of pay raises if Prop. B is not phased in over multiple years.

[…]

Fire Chief Sam Peña said he was “encouraged” by Monday’s talks, even if they did not produce immediate results.

“Anytime we’re sitting at the table and having a conversation is progress,” he said.

Peña said he was not sure whether Wednesday’s scheduled council vote would be delayed, but the department is moving ahead with implementation of Prop B anyway.

“The process needs to move forward, because the books do need to be balanced by the end of the fiscal year” in June, he said. Among the biggest changes Peña has sought is a switch from a four-shift work schedule for firefighters to three. Currently, firefighters work 20 24-hour shifts every 72 days, with occasional extra shifts for which Peña has said there is a high absentee rate.

The new, three-shift model would give firefighters regular days off. Peña said he was considering that switch even before Prop B’s passage as a way to save money that could be reinvested in fleet upgrades, among other things. Now, he said, it is about maintaining public safety while confronting HFD’s roughly $25 million share of Prop B’s annual costs.

The proposal headed to council on Wednesday shows that most of the staff reductions would come from firefighters, engineers and captains, though Pena said that absent any phase-in agreement, some employees could be demoted instead of having their positions absorbed through attrition.

See here for the background, and here for Mayor Turner’s letter. According to KUHF, the firefighters’ union tentatively agreed to the 3.5-year phase-in idea, though it sounds like there may still be sticking points as Mayor Turner is not saying that will eliminate layoffs – he’s been clear about needing a five-year plan for that – but merely reducing them. Like I said, we’ll see. In the meantime, 47 city employees who had nothing to do with foisting a large new budget item on us received their layoff notices late last week. I personally find that to be the most upsetting part of this whole saga. Just so we’re all clear, the stupid revenue cap prevents the city from raising taxes to pay for Prop B, and the city charter mandates a balanced budget. That’s why layoffs are inevitable barring a sufficiently slow phase-in. It was true (and communicated) before Prop B was ratified, and it remains true now.

House approves budget, and other news

Mar 31st, 2019

by Charles Kuffner.

Comments are off for this post

Always a major milestone.

In Dennis Bonnen’s first major test as speaker of the Texas House, the chamber he oversees resoundingly passed a $251 billion budget Wednesday after a long but largely civil debate — a departure from the dramatics that have typically defined such an affair.

Though lawmakers proposed more than 300 amendments to the spending plan, Bonnen, an Angleton Republican, and his chief budget writer, state Rep. John Zerwas, R-Richmond, finished the night with their budget plan largely intact. After 11 hours of relatively cordial discussion, lawmakers agreed to withdraw the vast majority of their amendments or move them to a wish list portion of the budget, where they are highly unlikely to become law.

The budget passed unanimously on the final vote. The legislation, House Bill 1, now heads to the Senate, whose Finance Committee was set to discuss its budget plan Thursday.

“I’m proud of where we are in the bill that we are sending to the Senate,” Zerwas said at the end of the marathon debate. “Each and every one of you should be incredibly proud of the work that you’ve put in here.”

The two-year spending plan’s highlight — a $9 billion boost in state funding for the public education portion of the budget — remained unchanged. Of that, $6 billion would go to school districts, and the remaining $3 billion would pay for property tax relief, contingent on lawmakers passing a school finance reform package.

The budget plan would spend $2 billion from the state’s savings account, commonly known as the rainy day fund, which holds more than $11 billion.

“I’m not here to compare it to previous sessions,” Bonnen told reporters after the House budget vote. “But I’m here to tell you we had a great tone and tenor tonight, and I’m very proud of the business that we did.”

[…]

So while Bonnen’s first budget night as speaker was hardly free of controversy — an argument over the effectiveness of the state’s “Alternatives to Abortion” program, for example, derailed movement on amendments for nearly an hour — the occasional spats paled in comparison with those of years past. There were no discussions at the back microphone of lawmakers’ sexual histories, as happened in 2015, and no one had to physically restrain House members to prevent a fistfight over the fate of a feral hog abatement program, as happened in 2017.

Still, state Rep. Jonathan Stickland, R-Bedford, continued his long-running campaign against the feral hog program. And though the exchange ranked among the evening’s rowdiest, it was more than tame by last session’s standards.

State Rep. Drew Springer, R-Muenster, again opposed Stickland’s amendment to defund the program, which reimburses local initiatives to eradicate wild hogs. Stickland responded, “Members, although I respect the thoughtful words of Rep. Springer … let’s end this program right here, right now.”

Stickland’s amendment failed, with just four votes in favor.

See here for more on last session’s House budget debate. One should never miss an opportunity to illustrate Jonathan Stickland’s failures. The House also approved a supplementary budget for the previous biennium, to cover expenditures that were not previously appropriated, such as the traditional underestimating of Medicaid’s costs and all of the Harvey recovery funding.

Speaking of revenues:

House Republicans muscled a heavily altered version of their property tax reform bill through a committee early Thursday, notching a single Democratic vote and swiftly shooting down attempts to further modify the draft.

A top priority for state leaders, House Bill 2 would require cities, counties and other taxing units to receive voter approval before levying 2.5 percent more property tax revenue than the previous year. A vote was expected to come Wednesday morning on a new draft of the legislation, which contains changes likely to appease small and special taxing units but leave big municipal leaders staunchly opposed.

But the hearing on the new version was postponed until past midnight. The 16-hour delay gave an unusual cluster of critics time to trumpet their concerns with the measure — and then for top House leaders to respond in an informal late-night news conference.

“Sometimes when everyone’s a little bit upset with you, maybe you have a good balance — that’s probably a good sign,” said House Ways and Means Committee Chair Dustin Burrows, the author of the legislation and a Lubbock Republican. “We worked really hard; we talked to a lot of different constituencies” and a lot of members. “I think you’ll see in the committee substitute, the work product and a lot of collaboration.”

As amended, HB 2 now exempts community colleges, emergency service districts and hospital districts from abiding by the 2.5 percent election trigger. Another provision lets certain districts, including cities and counties, bank unused revenue growth, so long as they average below 2.5 percent over five years. And new “revenue enrichment” language could cushion some taxing units by letting them raise $250,000 in new property taxes a year, even if it exceeded the growth rate. The threshold, set at $250,000 for 2020, would be adjusted by the state comptroller annually, based on inflation.

[…]

Currently, voters can petition for an election if property tax revenue growth exceeds 8 percent, a rate set during a period of high inflation in the 1980s. State leaders have touted the lower chamber’s proposal and a Senate companion as an overdue correction and as a needed check on spiraling property tax bills. But critics say the reform efforts would not reduce tax bills, just slow the rate at which they grow — and, in the process, hamper local officials’ ability to provide public services for growing populations.

As you know, I oppose revenue caps, no matter how well intentioned. The reason the Lege ties itself into knots every two years in a vain attempt to limit property tax growth is that a taxing system that so heavily relies on property taxes fundamentally relies on a system that is divorced from people’s ability to afford their taxes. As I muse every two years, if only there were some system of taxation that was proportional to how much money people made in a given year, that would solve so many of these problems. Too bad no such system exists anywhere in the world.

Of course, another way to limit property tax growth for homeowners would be to ensure that everyone is paying their fair share of property taxes.

As state leaders promote their property tax reform package as needed relief for everyday Texans, some Democrats and county appraisers suggest a provision in the tax code has stacked the system in favor of corporations that can appeal their valuations with a combativeness most homeowners can’t muster.

At issue: a 1997 amendment, drafted by a prominent tax attorney, that critics say has allowed business and industry to lower their property tax burden at the expense of other taxpayers. The provision offers all Texans a way to fight their appraisals by arguing they were treated unfairly compared to other properties. But critics say large property owners have capitalized on it to drive down their costs, while residences and small businesses can’t afford to do the same.

“If you have a whole category of property that is nonresidential systematically paying less, well who do you think is paying more?” said Bexar County chief appraiser Michael Amezquita.

Amezquita is one of several officials who say their districts have been inundated by appeals and lawsuits from commercial owners trying to lower their appraisals, which determine what taxes are owed on a property. Supporters of the “equity” provision say it’s a critical tool for all property owners, and that commercial properties aren’t afforded the tax exemptions many home and agricultural land owners receive. Critics counter only well-funded property owners can afford to sue — and when they do, there’s often little an appraisal district can do to fight back.

“The deck is stacked against us,” said Amezquita, who has been sued by a J.W. Marriott resort seeking to have its taxable value reduced. A spokeswoman for the hotel declined comment.

I’ve written about this before. This issue of equity appeals was a cornerstone of Mike Collier’s campaign for Lt. Governor. We’d be having a much broader conversation about fairness and equity in taxation if he had won that race, but he didn’t and so we aren’t. Better luck next time, I guess.

Anyway. The Senate still has to approve its budget, and school finance reform remains a work in progress. There’s a decent amount of harmony now, but plenty of opportunities for tension, drama, and good old fashioned nastiness remain. Which is as it should be.

How would you implement Prop B?

Mar 25th, 2019

by Charles Kuffner.

5 comments

Here, from last week, is Mayor Turner’s official announcement about layoffs, following a failure to come to an agreement with the firefighters’ union about a time frame to fully implement Prop B. Here’s the Chron story about the firefighters protesting the layoffs, which we knew were coming – indeed, we’d known since last year, as that was one of the main points Mayor Turner made during the Prop B campaign. The Chron editorial board agrees with Turner that given the limited options available, layoffs are the only reasonable choice.

Now, to be sure, there is the garbage fee proposal, which Council will vote on this week. It would, at least in theory, pay for the increased costs that Prop B imposes, though there are objections. I’ve laid some of them out – a trash fee should be used for solid waste collection, the potential for litigation is non-trivial – and I’ll add another one here: If a garbage fee is the mechanism for funding Prop B, that necessarily means that only some Houstonians are contributing to that. Anyone who doesn’t live in a house that has city of Houston solid waste service would not be subject to this fee. (At least, I assume so – it’s not clear to me how this fee will be assessed.) Maybe you think that’s a big deal and maybe you don’t, but I guarantee someone will complain about it.

So the question remains, how would you implement Prop B? We all agree Prop B will cost some money to implement. The firefighters have never put a dollar figure on it themselves – they have made claims that the fire department brings in revenues that could be spent on the fire department instead of other things, which doesn’t actually solve anything but just recapitulates the argument that the city should spend more on firefighters. Raising the property tax rate is out, as it would violate the stupid revenue cap. Indeed, as we know, the city has had to cut the tax rate multiple times in recent years, costing itself a lot of revenue in the process. The basic options are a flawed fee that will charge some households up to $300 a year and others nothing, and layoffs. And if you’re going to do layoffs, the ones that make the most sense are the firefighters themselves, as the vast majority of calls to HFD are for emergency medical services and not fires – EMTs are cheaper to hire, don’t require expensive fire trucks to get to where they’re going, and aren’t in scope of Prop B. And that, barring any late-breaking agreement to implement Prop B more slowly, is what we are going to get.

So then, what if anything would you do differently? I’m open to suggestion.

UPDATE: Here’s City Controller Chris Brown saying the cost of Prop B is unsustainable outside an agreement to phase it in over five years, which is what the city has been pushing for.

Garbage fee on the agenda

Mar 22nd, 2019

by Charles Kuffner.

9 comments

I don’t think this is going to pass, but it will get a vote.

CM Dwight Boykins

Houston Mayor Sylvester Turner on Wednesday said he would put a proposed garbage fee on next week’s city council agenda, but will not vote for it.

Turner agreed to put the idea promoted by Councilman Dwight Boykins as a way to to offset the cost of firefighter raises mandated by Proposition B to a council vote, even as he called it “regressive” and said it would hurt low-income Houstonians.

“I will put it on the council agenda next week to let council members have their say, but I will not vote to impose this fee on the people of Houston,” he said on Twitter.

[…]

Boykins’ original proposal largely fell flat among his council colleagues, some of whom said the fees were far too high. Boykins since has floated lower rates, and said Wednesday that he would call for fees between $19 and $27 a month when council votes.

In a statement Wednesday, Boykins said he was the “only member of City Council to put forth a proposal that creates a steady revenue stream while preventing massive and destructive layoffs.”

“My proposal is an alternative that secures public safety while saving the jobs of up to 500 firefighters, 200 police officers and up to 300 city employees,” Boykins said. “It’s an opportunity for city leaders to lead, and I hope my colleagues will join me in supporting this measure.

See here for the background. As you know, I support the concept of a garbage fee for the purpose of improving and expanding our existing solid waste services. I don’t support it for other purposes, such as using it to pay for firefighter raises. Fees are generally exempt from the revenue cap stricture – Mayor Parker raised a bunch of fees as part of her budget-balancing in 2010-2011, with some language at the time about what it cost to provide various services and how the fees for one service should not be subsidizing the cost of another. That said, I would wonder if something like this, which is both a big increase in what most people pay each year plus an obvious ploy to raise money to pay for something else, would run into a lawsuit challenging its validity under the revenue cap. Surely someone will seize on the opportunity to cause trouble. Be that as it may, the first question is who will vote for this. My gut says Boykins will have some support, but probably not a majority. But who knows? We’ll find out next week.

One more thing:

If the Mayor is opposed [to the garbage fee proposal], why put it on the agenda?

For one thing, so the firefighters will not be able to claim later on that Turner never even put a valid proposal to pay for Prop B up for a vote. The ads write themselves – “He never even gave it a fair chance!” They can still claim he opposed it, of course, but if Council votes it down by (say) a 12-5 margin, that takes some of the bite out of it. Also, too, by letting the vote go on there will necessarily be a discussion about how much the fee would be, which might make people think a bit differently about Prop B. It’s not like the firefighters ever put a price tag on it, after all. If people realize that paying for Prop B will cost them personally $200 to $300 a year – down from $300 to $500 as in the original proposal from Boykins – they might see the Mayor’s point more closely. Finally, if Turner is wrong and the proposal passes, he no longer has to lay anyone off and he can let individual Council members explain their vote. I think letting the garbage fee be voted on makes more sense from Turner’s perspective than refusing to put it on the agenda would have.

Firefighter layoffs

Mar 10th, 2019

by Charles Kuffner.

11 comments

Hoo boy.

Mayor Sylvester Turner plans to lay off up to 400 firefighters as he prepares to award pay raises required by Proposition B, the voter-approved charter amendment that grants firefighters the same pay as police of corresponding rank, according to five Houston City Council members who were briefed on the plan Thursday.

The apparent move to fully implement the pay parity measure comes after talks between the city and fire union about phasing in the raises over five or more years became strained last week. Meanwhile, city officials are preparing council members for the difficult task of closing a $197 million deficit in the annual budget that must be adopted for the upcoming July 1 fiscal year. About $80 million of that budget gap comes from the firefighters’ raises, council members were told.

In addition to the firefighter layoffs, Turner will seek to close the deficit by asking all city departments to cut their budgets by at least 3 percent, a move that is likely to require layoffs of, perhaps, 100 municipal workers, the council members said. Councilwoman Brenda Stardig said she was told no police officers will be laid off.

On May 9, Turner’s administration plans to issue back pay to firefighters retroactive to Jan. 1, which will total about $30 million, multiple council members said.

“So, basically, on May 9 you want to be hanging out near a firefighter because he’s going to be buying,” said Councilman Greg Travis. “He’s going to have a lot of money on that day.”

The city plans to mail layoff notices to firefighters within weeks, Travis said. Among the layoffs are 68 fire cadets who Turner has declined to promote amid a citywide hiring freeze than has spanned more than five months. The mayor nonetheless promoted more than 60 police cadets Monday.

The fire cadets filed grievances against Turner Thursday alleging that the mayor was discriminating and retaliating against them.

[…]

Turner, who repeatedly has warned of potential layoffs, told reporters his hands were tied because the charter amendment did not come with a funding mechanism. He also said the fire union rejected a city proposal to phase in pay raises. That offer did not appear to fully implement the charter amendment over the city’s proposed five-year window, falling short of increases in incentive pay that the finance department projects would be necessary to reach full parity.

“People want to put the administration in a box,” Turner said. “If you don’t implement Prop. B, people criticize you for not implementing Proposition B. When we move to implement Prop. B, people say, ‘We don’t want the layoffs.’ Well, you can’t have it both ways.”

During negotiations, the firefighters proposed to phase in Prop. B raises over three years, retroactive to July 1, 2018. The raises then would be distributed based on firefighters’ length of service, with all members reaching full parity by July 1, 2020.

No one can say they didn’t see this coming. One of the main arguments against Prop B was the cost, which would inevitably lead to layoffs because the vast majority of the city’s expenditures are personnel costs. It seems a little crazy that there wasn’t a way to agree to a phase in to avoid any drastic actions, but here we are. Note that the city has very limited capacity to raise revenues thanks to the stupid and harmful revenue cap, and the city is not allowed to run a deficit. That severely restricts options, and that’s the place we are in now. We’ve been through this before, back in 2010 when then-Mayor Parker faced a huge deficit caused by the downturn in the economy. She wound up laying off hundred of municipal employees. Police and firefighters were exempted from that, but this time it’s the firefighter pay parity referendum that is driving a big part of the deficit. Where should the cuts come from this time? You tell me.

One uncertainty appeared to stem from differences in educational requirements between the departments. For example, police officers must have a master’s degree to be promoted to assistant police chief, a stipulation that does not exist for assistant fire chiefs and fire marshals. Some firefighters may receive reduced raises due to the differing requirements, multiple council members said, explaining why the latest cost estimate of $80 million falls more than $30 million below Turner’s previous estimate.

There is speculation this will lead to a lawsuit. I’ve expected that from the beginning. And I fully expect it will still be litigated the next time the Mayor is on the ballot in 2023.

Always beware revenue caps

Feb 2nd, 2019

by Charles Kuffner.

12 comments

They’re always a bad idea.

Flanked by the state’s top legislative leaders, Gov. Greg Abbott announced Thursday that both chambers of the Texas Legislature will push to curb property tax growth by limiting how much money local governments collect without voter approval.

Fellow Republicans Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, as well as the heads of both chambers’ tax-writing committees, joined Abbott in making the announcement. Their news conference followed the filing of identical bills in both chambers, Senate Bill 2 and House Bill 2.

Abbott said it was “completely unprecedented” for lawmakers to be so closely aligned on such an important issue this early in the session.

“Most importantly, it’s a testament to the voters in this state,” he said. “The voters demanded this, and this demonstrates that the Texas Legislature is responsive to the needs of our voters.”

But two Democrats who sit on the House Ways and Means Committee said the proposed legislation is far from being a done deal. And an advocate for city governments said there are plenty of unintended consequences that need to be worked out. Chief among them is ensuring that cities aren’t suddenly unable to afford police officers and firefighters.

Thursday’s bills seek to require voters to approve tax rates that allow government entities like cities, counties and school districts to collect an additional 2.5 percent in revenues from existing property compared with a previous year. The threshold would not apply to small taxing units — those with potential property and sales tax collections of $15 million or less.

Currently, cities and counties can collect an additional 8 percent in revenues without involving voters. But even then, residents must collect enough signatures to force an election. The new pair of bills would automatically trigger what’s called a rollback election. If voters shoot down the measure, the government entity would have to set a tax rate that allows it only to collect revenues from existing properties that are less than 2.5 percent more than the previous year.

The rollback rate is also based on the appraised value of properties within a taxing unit’s borders. That means a city or county could hit the rollback election threshold without changing its tax rate — or even if it lowers the tax rate — if there is a significant increase in local property values.

The legislation does not apply a cap to individual property tax bills. Because it would limit only how much government entities can collect in property tax revenues before getting voter approval, an agency could stay below the rollback election rate, and that portion of a property owner’s tax bill could still increase.

Local officials are almost certain to to push back. Bennett Sandlin is the executive director of the Texas Municipal League, which advocates for city governments. His organization estimates that about 150 of the state’s largest cities would be affected if the legislation passes. He said that the rollback threshold is lower than inflation and could prevent cities from paying for first responders’ raises, filling potholes, and keeping recreation centers or libraries open.

As the story notes, this is more ambitious than what Abbott and Patrick pushed for in 2017, and they’re doing it with smaller majorities. On the other hand, these are the highest-priority bills they have (hence the HB2 and SB2 designations), and they’re no doubt going to go all out. It’s very possible they could succeed.

But here’s the thing. This is what they rolled out after making big promises about reforming school finance and giving more money to schools. Did you notice what was missing in this rollowt?

They were so tuned in to their harmonic convergence, they didn’t talk much about what their legislation would actually do, leaving the details to the bill sponsors to explain later.

They did say they were going for a 2.5-percent growth limit on property taxes in local school districts, cities, counties and other government bodies. It’s aimed at overall taxes, a leash on the overall mix of property values and tax rates that determine what happens to the average taxpayer’s bill. Anything that increases a local government’s property tax revenues by more than that would trigger an automatic November election asking voters for permission.

You might wonder how public education is going to get more financial help, as proposed by this same group of elected officials, if the state is going to limit school districts’ ability to levy taxes.

The short answer is that the state’s going to pay for it. The House’s proposed budget for the next two years adds billions to what the state is spending on schools. The Senate’s plan doesn’t spend as much, but the increases are significant (and in one case, more specific: Patrick has proposed $3.7 billion in teacher pay raises). Abbott floated the idea of holding down local taxes and tax increases — an answer to loud and persistent complaints about property taxes — and increasing state spending to fill the gap. And Comptroller Glenn Hegar, the fourth official at those weekly breakfasts, has proposed requiring the state to pay at least 40 percent of the cost of public education, along with any increases due to inflation.

But they haven’t said where the state money will come from. Nobody in the state government’s high places has proposed raising a tax, cutting other state spending to produce money for education, or weeding through the state’s tax exemptions and loopholes to shore up the state’s share of the public education load.

In other words, right now it’s all underpants gnomes. I don’t know about you, but I’m not expecting much more in the way of details about how this is supposed to do all the things they say it will do.

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