Budget and Fiscal Affairs Committee Meeting on FY2027 Proposed Budget and Five-Year Forecast - May 6, 2026

The Budget and Fiscal Affairs Committee, chaired by Vice Chair Mario Castillo, met on May 6, 2026, to receive the proposed FY2027 budget and five-year forecast from Finance Director Melissa Dubowski. The meeting covered the city's financial outlook, including two major structural reforms: moving the Solid Waste Department into the combined utility system (CUS) with a $5/month administrative fee, and implementing a 5% right-of-way rental fee from the CUS to the general fund. The proposed budget reduces the projected $209 million gap to $25 million through these changes, efficiency savings, and conservative revenue estimates. Council members posed detailed questions on fee structures, property tax cap usage, overtime budgeting, and the impact on water and wastewater infrastructure. Public speakers offered additional perspectives.

Public Comments & Testimony

• Jack Valinski questioned the wisdom of using excess water fund reserves for solid waste when infrastructure needs remained, and expressed skepticism about overtime projections.
• Ruben Garza (Strong Towns Houston) applauded the right-of-way fee but advocated for a transportation utility fee based on development density to better align costs with infrastructure consumption.
• Felix Kapoor requested clearer explanations of the CUS fee structure, noted that the $5 administrative fee would not directly improve worker safety or equipment, and flagged a 16% reduction in the "quality of life" category (parks, libraries, health) in the mayor's budget.
• Dominic Mazok suggested starting budget processes earlier, contracting out services in outlying areas, and raised concerns about the city's role in hospitality ventures and potential World Cup shortfalls.

Discussion Items

• Structural Budget Reforms: Director Dubowski presented the plan to reorganize Solid Waste as a division of Houston Public Works within the CUS, funded by a $5/month administrative fee (rising to $25 over time). The fee covers only the administrative portion ($7.57 per household per month per the Burns & McDonald study) and will not directly fund new trucks or salary increases. The right-of-way rental fee of 5% of CUS gross revenues ($104M in FY27) is common among Texas cities and uses the CUS's excess fund balance.
• Property Tax and Revenue Cap: The budget assumes no tax rate increase, keeping it at $0.51919 per $100 valuation, with property tax revenue of $1.5 billion—$20 million below the state and local cap. Councilmember Pollard criticized this choice, arguing it undermines arguments for future cap relief. The administration responded that raising the cap would require a tax rate increase not desired at this time.
• Overtime Budgeting: The FY27 budget includes $6.6 million more for police overtime and $9.1 million more for fire overtime compared to FY26 adopted, based on a new methodology using five-year averages. Actuals are expected to be higher, but offset by savings elsewhere. Councilmember Ramirez pressed for details on fire overtime (projected $82.6M in FY26 actuals vs. $53M budgeted for FY27).
• CUS Fund Balance and Infrastructure: Multiple council members questioned the use of CUS reserves for solid waste rather than water/wastewater projects. Director Dubowski and Chief Operating Officer Randy explained that the CUS has excess reserves (debt service coverage ratio 2.15 vs. required 1.2, cash reserves 550 days vs. policy 300 days) due to efficient operations and front-loaded capital appropriations. The East Plant replacement ($4 billion) will be financed via low-cost Texas Water Development Board loans, not cash reserves.
• Five-Year Forecast: The structural changes reduce the projected gap from $523 million in FY31 to $172 million. The out-year gaps remain and will require continued efficiency measures, potential new revenue, and legislative monitoring.
• Fee Implementation and Guardrails: The $5 administrative fee will be established via the budget ordinance, with future increases requiring a cost-of-service study and council ordinance. The right-of-way fee is set at 5% for FY27, with future increases potentially capped by master bond ordinance amendments. The administration committed that the $25 maximum fee will not be exceeded without a rate study, but Mayor Whitmire stated he would not go above $25.
• Managed Competition: Councilmember Davis raised the idea of private sector competition for solid waste. The administration noted that major vendors require 10-15 year contracts, 50-60,000 customer maximums, and the ability to select favorable neighborhoods, making managed competition challenging.

Key Outcomes

• No formal votes were taken; the committee received the presentation and will continue with budget workshops (May 12-19), a public hearing (May 20), and a virtual town hall (May 20 evening). Council members are to submit questions via SharePoint. The budget will be considered as amended on June 3.
• The administration confirmed that the $6 rebate for private trash pickup will remain in FY27.
• The recycling and container lease special revenue funds will be closed and their balances transferred to the CUS upon budget adoption.
• The administration will develop a discounted rate structure for seniors and low-income residents for future fee increases, but not for the $5 fee in FY27.
• The committee directed that detailed questions on the CUS, solid waste, and other departments be addressed in upcoming workshops.