Houston’s new garbage fee will likely generate less money than anticipated, city finance officials said Tuesday, to the surprise of several city council members.
City officials said they did not initially realize that sales tax is owed on the new fee, and have decided to deduct the tax from what the city collects rather than adding it to what Mayor John Whitmire had announced would be a $5 monthly fee.
The council approved the new fee as part of the city’s annual budget in June in the hopes of improving the city’s long-struggling trash collection services. The vote also moved the $134 million solid waste budget from the strained general fund – fed mostly by property and sales taxes – into the city utility system within Houston Public Works.
Waste services are now funded by water bill revenues, plus a projected $24 million from the new fee. But the tax means the utility system will take in roughly $1.8 million less than that, with that amount parceled out to the state of Texas, Metro and the city general fund.
Multiple council members, including Amy Peck and Julian Ramirez, expressed concern at a budget committee meeting Tuesday that they had not been made aware of the sales tax component during the budget process.
“In all the briefings and models presented to us, I don’t recall us ever talking about sales tax being part of it,” said Peck, who added after the meeting that she first learned of the tax on her own water bill.
“It was just never communicated, and the models don’t incorporate it,” said Council Member Sallie Alcorn, who chairs the budget committee.
The city learned of the sales tax requirement through legal research during and after the budget process, said finance director Melissa Dubowski. But city officials opted not to add the 8.25% sales tax on top of the fee and instead deduct it from what the city collects, she said, to keep the fee at $5.
That means the fee, which began hitting water bills in August, actually will generate $4.62 a month from city waste customers for the utility system.
The remaining 38 cents will be collected as a 8.25% sales tax, with the majority going to the state. Houston will keep the city portion of the tax, about $240,000 per year, though that money will flow into the general fund, not the utility system.
See here for the background. I’m not going to be too mad at anyone on Council for not knowing about this, or anyone in Solid Waste. I sure didn’t know the sales tax applied – it’s honestly weird to me that is does, but the law can be funny sometimes. But this is what the lawyers are for, and someone should have asked the question a lot sooner than this. The amount of revenue being lost is small, and I presume the city can adjust for this in the next budget. It’s just that this is embarrassing, and a complete own goal. Someone needs to ask City Attorney Arturo Michel about this. Some amount of accountability is needed here.