Budget & Fiscal Affairs Committee Meeting - March 31, 2026

The Budget and Fiscal Affairs Committee, chaired by Sally Alcorn, met on March 31, 2026, to discuss the monthly financial report, an audit division update, and a multi-family recycling pilot program. Key topics included projected general fund deficits driven by public safety overtime, progress on the audit division's risk assessment and software implementation, and the status of a grant-funded multi-family recycling pilot program. Committee members also received updates on the upcoming budget calendar and the launch of a new spend analysis dashboard.

Consent Calendar

• No consent calendar was listed on the agenda.

Public Comments & Testimony

• Mike Garver and Gretchen Hilliard (Texans for Clean Water / Buffalo Bayou Partnership): Expressed strong support for multi-family recycling and a proposed deposit return system (DRS) to incentivize bottle and can returns, citing litter reduction, landfill life extension, and reduced pollution in Buffalo Bayou and the Gulf of Mexico.
• Malachi Key (Air Alliance): Voiced support for the pilot program, emphasizing its environmental and public health benefits, including reduced plastic pollution and fewer truck emissions from longer landfill hauls. He also urged adoption of a dedicated solid waste fee to fund the department.
• Jack Velinski (public commenter): Called for a solid waste fee, warning of further cuts to solid waste, libraries, and parks without new revenue.
• Bill Kelly (Environment Texas): Supported expanding the pilot citywide and called for a dedicated solid waste fee. He noted Houston's 18% diversion rate is half the national average and that cities like San Antonio, Dallas, and Austin generate significant revenue from such fees. He also urged an end to "chemical recycling" (plastic incineration).

Discussion Items

• Monthly Financial Report (MOFAR) - Period Ending February 28, 2026

  • Presenters: Finance Director Melissa Dubowski and Deputy Controller Will Jones.
  • Key points:
    • General fund ending fund balance projected at $37 million (11.7% of expenditures less debt and pay-go), $16.9 million lower than prior estimate due to conservative revenue projections.
    • Revenue projection increased by $39 million (driven by $22 million higher sales tax and $14 million higher ambulance fees).
    • Expenditure projection increased by $68 million, led by $51 million in fire department increases (including $39 million in overtime) and $16 million in police department increases (including $11.8 million in overtime).
    • Net impact: Controller’s projected deficit of $174 million, up nearly $100 million from budget adoption. An additional $17.3 million in unconfirmed category management savings could widen the gap.
    • Enterprise funds show mixed results: Aviation revenues down $27 million, Combined Utility System revenues down $74 million (water/sewer collections), Stormwater Fund expenditures down $20 million (delayed demolition services).
    • On May 5, the city priced $1.38 billion in bonds for debt restructuring and Convention District transformation, achieving a 4.85% all-in cost.
    • A state sales tax error (approximately $25-26 million overpaid to Houston 2018-2023) is being repaid by the city over 43 months at 0% interest.
    • Councilmember Flickinger confirmed that the city lost a firefighters' union arbitration regarding step increases; briefings for council members are being scheduled.
    • Councilmember Kamen raised concerns about under-budgeting for disaster response and natural disasters, and requested updated financial policies (including the rainy day fund) before budget passage in June.
    • Councilmember Ramirez asked about projections for FY27 overtime; Director Dubowski said the department will work with public safety to distinguish core operational overtime.
    • Councilmember Kamen asked about economic uncertainty (tariffs, oil prices, Iran conflict) and its impact on sales tax; presenters noted they budget conservatively, using pessimistic-to-likely projections.
  • Questions/comments: Councilmembers Ramirez, Flickinger, and Carter asked about stormwater demolition delays (due to contract approvals and property eligibility criteria), water/sewer revenue declines (weather-related), ambulance fee increases (state law change), the TERS administrative fee decline (lower than expected increment), and the impact of major events on overtime.

• Audit Division Update

  • Presenter: Jennifer Pierce, Deputy Director in the Controller’s Office.
  • Key points:
    • Eight audits completed; 32 open audit findings addressed by the Houston Fire Department (29 of 32 findings remediated adequately).
    • A point-in-time assessment of 165 open findings found 112 ready for follow-up audit validation; more than half were issued before 2020.
    • General Services Department audit: no formal findings, but observations included a gap in conflict-of-interest certifications (required only for elected officials, not employees involved in contracting) and risks in the application of the city cost index (CCI).
    • Division improvements: Implementation of Optro audit software to centralize workflows, enforce methodology, and improve accountability. Weekly status updates aim to shorten audit cycles from over a year to six to nine months.
    • Upcoming work includes overtime audits (HFD uniformed), segregation of duties (SAP), and a citywide enterprise risk assessment (funded, requires broad participation).
  • Questions: Vice Mayor Pro Tem Peck asked about the conflict-of-interest gap; Ms. Pierce responded that it applies to GSD and procurement/HR functions. Vice Chair Castillo thanked the team for their work.

• Multi-Family Recycling Pilot Program

  • Presenters: Veronica Lazama (Chief of Staff) and Director Hassan of Solid Waste Management.
  • Background: Initiative stems from a 2021 budget amendment and a 2023-2024 Resource Recovery Implementation Committee (RRIC) study, which found that 82% of Houston’s waste (commercial + multi-family) is not being recycled. The city’s single-family curbside program collects about 54,000 tons/year; the McCarty landfill has approximately nine years of remaining capacity, and building a new landfill would take ~15 years.
  • Pilot details: Funded by a $315,000 grant from The Recycling Partnership and the Alliance to End Plastic Waste. Goal: enroll 3,000 units (currently ~1,300 units in six properties). Services include free city-provided roll-off containers, in-unit recycling bins, education, and valet pickup at some properties. No illegal dumping or miscollections reported so far. Collected ~9,080 pounds diverted in five months. Participation rates ~20% (high for multi-family). The next phase seeks to enroll 1,200 units at Camden properties in April.
  • Questions/clarifications: Councilmember Kamen emphasized the program is a pilot; if made permanent via ordinance, the city would serve as an enforcement/reporting agency, not the service provider (apartment complexes would manage their own recycling, as with trash). Director Hassan confirmed this. Contamination data pending; a mid-pilot audit is planned.
  • Councilmember Flickinger asked about costs: $315,000 grant covers bins, valet services; the city’s in-kind contribution is collection/transportation (no specific dollar amount provided). The grant covers all associated costs for one year.
  • Councilmember Ramirez encouraged the department to plan ahead for landfill replacement and thanked the Houston Apartment Association for partnership.
  • Councilmember Carter noted FCC’s concern about high residential contamination rates (city highest in nation) and suggested dedicated recycling trucks could lower contamination. Director Hassan clarified that trucks do not begin routes contaminated; contamination arises from improper recycling.
  • Councilmember Kamen clarified that any future citywide program would be similar to other Texas cities (reporting/enforcement, not operations), and that this pilot will provide data on effective education methods that could apply to residential recycling.
  • Councilmember Davis asked for hard numbers on in-kind city costs and potential impact on overtime/equipment; Director Hassan promised to provide estimates.

Key Outcomes

• No votes were taken during the meeting.
• Next Steps:
  • The open space ordinance will be presented to the Planning Commission on April 30, with a public hearing on May 14 (potentially a second hearing on May 28). It will come to the Budget & Fiscal Affairs Committee on June 2, then to City Council.
  • The FY27 budget will be released on May 5; the five-year forecast on May 6; budget workshops May 12-19; budget town halls on May 16 (Fondy Rex Center) and May 20 (9 a.m. public hearing and 6 p.m. virtual town hall); council amendments due May 27; budget vote on June 3.
  • A workshop on the new Spend Connect Dashboard will be held April 1 (2:30-3:30 p.m.) and April 8 (10-11 a.m.).
  • The next BFA meeting is scheduled for Tuesday, April 28, 2026, at 10 a.m., where the Ernst & Young contract management progress will be presented.
  • Councilmember Flickinger and others requested additional information on the arbitration ruling and the impact of overtime on the upcoming budget.