Houstonians should begin steeling themselves for new taxes or fees as city officials look for ways to generate hundreds of millions of dollars to eliminate the city’s ongoing budget deficit.
A five-year forecast of the city’s finances presented to City Council on Wednesday painted a dire picture, predicting the city’s current deficit of $187 million could more than double to $389 million if no new revenue sources are found.
Those figures are causing concern among some on council about how quickly they may be asked to consider a host of options that could saddle residents with new taxes or fees, At-Large Councilmember Letitia Plummer said.
“When you have a budgetary gap this large, we have to figure something out really fast,” Plummer said.
When Mayor John Whitmire unveiled his first budget proposal for the coming fiscal year on Tuesday, he repeatedly stated “all options are on the table” for generating revenue needed to eliminate the growing deficit. None of those options are included in the mayor’s proposed spending plan.
“After five months down here, I wasn’t prepared to launch these new revenue streams until the public knows we’re efficient,” Whitmire said.
Instead, the budget proposal calls for the city to dip into its unassigned general fund balance of about $470 million to cover the deficit for the next year, taking a large chunk out of the massive influx of COVID-19 relief funding Houston received from the federal government.
The city also is seeking to cut spending through an efficiency assessment of all departments aimed at eliminating unnecessary or duplicate spending.
Those efforts will not be enough on their own, city Finance Director Melissa Dubowski acknowledged Wednesday.
A conversation with
HISD Seniors
& Mike Miles
Vulnerability. Accountability. Connection.
Superintendent Miles and the students he serves, exploring the trials and triumphs of his first year.
Pay-what-you-can
Doors at 6,
show at 7 p.m.
Learn more Revenue options under consideration
Dubowski presented the administration’s five-year forecast to the council, offering the closest look yet at options Whitmire is considering to generate new revenue.
The mayor previously indicated ideas under consideration include lifting the city’s cap on property tax revenue, implementing a monthly fee to fund garbage collection, and diverting some water and sewer utility revenue to the general operating fund. He also pointed to increased collaboration with county government for cost savings in some areas Tuesday, and suggested additional state funding could be appropriated to the city in the next year.
Dubowski’s presentation included a forecast that the city could have a $45 million budget surplus by the end of fiscal year 2025 next June, if the revenue-generating measures Whitmire is considering are approved. That reflects $232 million in additional revenue over the next year.
Dubowski continued to say all options are being considered, but under questioning by At-Large Councilmember Julian Ramirez, the finance director said $100 million of that calculation would be from a garbage fee and another $100 million would come from revenue-sharing with the city’s water and sewer utilities.
Many other cities around the state receive income from their local utilities, Whitmire said. Those utilities typically send between 3 and 7 percent of their revenues to the municipal general fund for the use of public rights-of-way, a mayoral staffer added.
“We could ask them to share that revenue with the general fund, but we don’t,” Whitmire said.
Dubowski’s forecast also noted the city has lost out on $2.23 billion since 2004, under Houston’s revenue cap. The voter-imposed cap limits property tax collections to a combination of the inflation rate and population growth, or 4.5 percent, whichever is lower. The cap would block an estimated $338 million from city coffers in the upcoming fiscal year.
The city has had to reduce its property tax rate nine times in the last 10 years to stay under the cap, fueling the structural budget deficit.
Whitmire and other local officials repeatedly have floated the idea of repealing the local cap or seeking a public safety exception that would allow the city to collect more property taxes for police and fire services.
Impact of firefighter settlement
The mayor also has raised the idea of transferring more funds from the Metropolitan Transit Authority, the area’s public transit system, to the city for infrastructure improvements . While it remains an option on the table, revenue from such a move was not included in Dubowski’s forecast, she said.
The budget proposal for fiscal year 2025 is intended to serve as a runway to give city officials time to consider revenue-generating proposals for fiscal year 2026, Dubowski said.
District H Council Member Mario Castillo said he is looking forward to learning more, but he was encouraged by the seriousness with which Whitmire’s administration is taking the problem and considering solutions.
Castillo said he is most interested in the results of a study of the Houston Solid Waste Department launched last month that could lead to the recommendation of a garbage fee .
The mayor’s proposed budget does not include exact figures for the impact of a contract agreement that is expected to end a years-long dispute with the city firefighters union. The agreement, which includes $650 million in back pay and 34 percent in raises over five years, will cost the city an estimated $1.5 billion, including interest, over the life of the contract.
A final ruling from the judge in the case is expected in the coming weeks. That ruling will come with final details on the settlement and information about the annual bond payments that will be needed to cover firefighters’ back pay.
Once those figures are known, it will be easier for City Council to determine the best available revenue-generating options, Plummer said.
“Right now, we’re floating through this area of uncertainty, we’re literally in a gray area,” Plummer said. “Once we have that ruling, things will be a little more black and white.”
Whitmire declined to provide a specific timeline on when detailed proposals would be unveiled, but he said the review of the city’s spending would need to be completed first.
Most Popular
Comments / 0