Even if the Legislature approves the City’s pension reform plan and city voters repeal the Rev Cap City Charter amendment and approve $1 Billion in new pension bonds, by the City’s 2019/2020 Fiscal Year (if not sooner), Houston will once again face budget deficits unless the City Council raises the property tax rate.
City budget deficits are much more likely to occur, if in November, City voters also approve a City Charter Amendment to create a Defined Contribution (DC) 401K style “pension” plan for new city employees. This new retirement plan and the debt service cost of $1 Billion in pension bonds will eat up any new revenue generated from lifting the City’s Rev Cap as city spending on General Fund operations, even after pension reform, will grow faster than the annual rate of inflation and growth in the city’s population. More importantly, General Fund spending is likely to grow faster than the annual increase in property valuation inside the city.
The real cause of the City’s budget deficits is not Defined Benefit (DB) pension payments or the Rev Cap – it’s really the failure to modernize city government to make it more efficient and less expensive to operate. In Houston, we have a 19th Century city government structure operating on 20th Century technology in what is now the 21st Century – the era of enhanced, cost effective services through the use of “smart” technology, data analytics and artificial intelligence (A.I.).
Over the next two to three fiscal years, City of Houston officials and Houstonians are going to learn that city pension payments and the City Rev Cap were not the root cause of the City’s budget problems. City spending on the Police Department is growing while the number of police officers has essentially declined. This is just one example of the bigger problem in the city: the antiquated structure and inefficient operation of city government that has been ongoing for decades.
If we are really going to fix the City’s budget and fiscal problems, we are going to have to restructure the Police and Fire Departments as well as modernize all of city government to make Houston a “smart” city. Additionally, the City and County need to consolidate Health Care services, Parks Departments, Library services, Housing Authorities and Departments and the City should turn over operation of all the city golf courses to a partnership composed of the Houston Golf Association, The Lone Star Golf Association and Hispanic Golf Association. These steps would help both the City and County save money through economies of scale and the elimination of redundancy. They would also help achieve the real structural reforms needed to fix the City’s long-term budget and fiscal challenges through modernization and consolidation of government.
The City can’t keep depending on annual increases in residential property valuation. Those increases, in property taxes, are making housing, in Houston, increasingly unaffordable for low income and working class Houstonians. The City also needs to better utilize the existing Tax Increment Reinvestment Zones
(TIRZs) to help address infrastructure modernization, flood control and the constructionof more affordable housing inside the City. City voters also have an important role to play in ensuring that local elected officials remain fiscally responsible and attentive to the issues of concern to taxpayers.
In November, City voters are likely to be called on to decide:
• whether to eliminate the City’s Rev Cap;
• approving the issuance of $1 Billion in Pension Bonds to be repaid out of General Fund Revenue over the next 30 years;
• approving the creation of a Defined Contribution (DC) 401K style retirement plan for all new city employees; and
• whether to authorize the County to use property tax dollars to fix up the Astrodome, a proposal previously rejected by voters.
It is also possible that Metro may have a transportation referendum on the November ballot and depending on what happens in court, city elections for Mayor and City Council could also possibly be on the November ballot. Depending on circumstances, there may be other issues on the November ballot including any proposed state constitutional amendments sent to the voters by the Legislature currently meeting in Austin. Real budget and fiscal reform, in Houston, is going to require the modernization of city government, voter and taxpayer oversight of City officials and TIRZs as well as the consolidation of selected city and county departments and services.
♦ Carroll G. Robinson is a former At-Large Houston City Council Member who served on the City’s Budget and Fiscal Affairs Committee. He was a candidate for City Controller in 2015 and currently serves as a Citizen Member of the Board of Trustees of the Houston Firefighters’ Relief and Retirement Fund. Robinson is an Associate Professor of Public Administration and Political Science at Texas Southern University’s Barbara Jordan-Mickey Leland School of Public Affairs. The observations and recommendations in this commentary do not represent the official opinion of any of the organizations Professor Robinson is affiliated with. They are his insights based on his experience in city government and years of studying the City budget, City finances and local economic issues.