Good afternoon, everyone.

The budget and fiscal affairs committee will come to order at 2 p.m.

I am Vice Chair Mario Castillo, joined by colleagues, Councilmember Julian Ramirez, Councilmember Toyla Carter, Councilmember Joaquin Martinez, and also staff from Councilmember Alejandra Salinas, Councilmember Kamen, Councilmember Flickinger, and Councilmember Mary Nan Huffman.

I call this meeting to order and would like to welcome all council members in attendance and their staff.

Today's agenda is the proposed FY 2027 budget and forecast.

Before we get started, a few important dates.

Today, May 6th, we are receiving the five-year forecast at the Budget and Fiscal Affairs Committee.

May 12th through 19th, we will be holding budget workshops at the Budget and Fiscal Affairs Committee.

May 16th, an in-person budget town hall at the Fondy Recreation Center.

That is a Saturday at 10 a.m.

May 20th, a public hearing at the council uh city council meeting at 9 a.m.

here in chambers.

And that evening, a virtual budget town hall at 6 p.m.

online and May 27th.

Council members submit amendments here at the horseshoe for the budget with June 3rd being the meeting where the budget is considered as amended.

Also, uh our chair, Councilmember Alcorn has joined us.

Uh we welcome her to the meeting.

So for the FY2027 budget workshop procedures, council members are encouraged to submit any department budget workshop questions in a word document and upload those to SharePoint Budget Workspace.

All presentations for budget workshops will be posted on SharePoint 48 hours before the day of the department's workshop.

Those presentations will then be uploaded to the BFA website as they become available.

Departments have been directed to provide responses to council members within 48 hours of receipt.

Department responses will also be uploaded to SharePoint, and questions from council members can be uploaded at any time during the budget workshop process.

The earlier the better, allowing departments plenty of time to provide responses.

In terms of the rules for today's meeting, council members and staff, please hold your questions until the end of the director's presentation.

As of our deadline yesterday, 5 p.m.

We have five public speakers signed up to speak.

However, if there are any members of the public that would like to participate in public comment, again go to the sign up sheet on the press table.

The agenda item proposed FY2027 budget and five-year forecast is what we will hear.

Um so at this time I'd like to welcome finance director Melissa Dubowski to present the proposed FY 2027 budget and five-year forecast.

Also, before you start, Director, I just want to recognize we've been joined by staff uh from Councilmember Jackson's office as well as Councilmember Pollard.

Thank you.

Great, thank you.

Good afternoon.

Um so before I get started on the budget overview and five-year forecast, I wanted to thank all the hard uh the team that put all the hard work into producing this budget.

Um, I know we usually talk about how busy we are at this time of year, but we really started working on this budget on July 1st of last year, um, and even a lot of the pre-work that went into some of these ideas has been going on for many years.

Um, so but not to say that of course there's always a crunch time at the end.

So the team that's sitting behind me, and we also have some um some more staff back at the office that are still working, right?

Because um we're still, as you mentioned, we have the department budget workshops coming up.

Um, but I really wanted to thank them for all the long hours they put in, nights, weekends, way, way too long one night.

Um, so uh they really sacrifice a lot to put this document together.

Um it's not just them, it's also their family, um, that supports them.

Um, so I really want to spend a moment to thank them.

Um, thank you.

Then, of course, my own family.

Um, my children have been very patient with me, even last night working on the slides.

Um, my husband that supports me, and then all the other departments at the city, they put a lot of work into this as well, really working together and pulling together to get this budget where it needed to be.

So thank you to everyone.

Okay.

So we'll go to I think it's slide five.

Connecting budget to strategy.

So I spent a little bit of time talking about the outcome-based budgeting.

So we continue on with the on slide six with the outcome-based budgeting, the way we lay out the budget.

It's based on mayor's priorities and programs arranged around those priorities.

Looking in the budget book, which council members received hard copies of yesterday and is also available on the website.

You see the budget broken out, both expenditures and revenues and FTEs by program.

Associated with each of those programs, we have something that we call either performance measures or sometimes known as KPIs.

So I'll talk a little bit more about those in the slides to come.

But basically, we're on, I think maybe the third or fourth year now of organizing our budget around the outcome-based budget way of organizing it.

So on the next slide, this slide goes over the mayor's priorities.

So they're the same priorities that we've had for the last two years, with the top two really being public safety and infrastructure.

The second two are government that works and quality of life.

And that really reflects the mayor's priority and vision for the city.

So on slide eight, again, connecting budget to strategy.

So outcome-based budgeting is really about data-driven decision making and making sure that we have a way of measuring our results and linking our budget to the goals that we have at the city.

The point of it is to really increase increase transparency and to put some meaningful measures that the public can understand and be able to understand how their dollars are being put to work towards which programs.

So just a little bit of update on what's been going on with the outcome-based budgeting.

Back in fiscal year 25, we went through the citywide efficiency study where all of our performance measures were evaluated by our partners with Ernst and Young.

KPI's key performance indicators with each department doing workshops throughout fiscal year 26 to refine those key performance indicators and to focus on which of those performance indicators are most meaningful for the public.

So moving on to what the next steps are, we still want to continue to refine those programs in KPIs.

And on slide nine, we give a breakdown of some of the departments that have gone through the deep dive workshops already.

There's 12 different departments that went through the deep dive workshops, and a lot of those updated KPIs you see as part of the proposed budget.

So each of the department directors, when they do their budget workshop, is going to go through all of their KPIs for their department and talk about which ones are new or which ones are I don't want to say going away, but maybe more things that are tracked internally versus in the external facing document to really try to focus on what's the most meaningful for the public.

So going on to the next section, we'll talk a little bit about the structural budget reforms that are the newest part of this year's budget cycle.

So some of these slides might look familiar to you all on the next slide.

There's some of the information that we talked about in some of the one-on-one meetings that we had before the budget was announced.

So just to give an overview of sort of what's been going on since January of 2024, I already mentioned that we went through the Arnston Young citywide efficiency study.

We did a lot of reorganization of the departments, looking at the spans and layers, looking at how many staff to manager ratios we had, and going through that process to really be as streamlined and efficient as we can with our resources.

So going on into now 2025, we really aim to look at how we could reduce the expenditure budget for the city.

So we had a lot of sustainable reductions that were part of the FY26 budget, including the voluntary retirement incentive program that generated about 30 million dollars of recurring savings for the general fund alone.

In addition to a host of other items that resulted in really kind of bringing down the baseline where we were for fiscal year 26.

And I know we talked all about that last year, so I'm not gonna spend too much time focusing on fiscal year 26.

But we knew that we had a lot a lot more to go.

We knew that the funding gap for fiscal year 27 was looming around 200 million dollars, and we knew that we had, although we're still, of course, continuing on the efficiency measures and figuring out, you know, if we have aged vacant positions that have been vacant for a long time, you know, what other savings can we identify.

We know that all of those small things are not going to, while while all small pieces add up to something larger, we know that that's not going to be enough to generate 200 million dollars in savings that we we really need for fiscal year 27.

So on slide 12, I'm not gonna spend too much time on this slide because I think we all know we have the property tax revenue cap with the state cap and the local cap, and we do have some more slides in the back of or in the middle of the presentation about that.

But we have obviously we have those caps in place, limiting our single largest source of revenue for the general fund.

We have reduced our tax rate consistently for over a decade.

It was at 63 cents and now it's down to 51 cents.

The same time we have a growing population and a growing demand for services that we need to provide to the constituents.

We know that costs are increasing, right?

We have to deal with inflation just like just like the average citizen and our costs that we have to perform those services, and we also have infrastructure obligations that we need to comply with.

So moving on to slide 13 to get into the details of what we're doing as part of the FY27 budget.

Um the first item is uh having the solid waste department become part of the municipal utility that the city already maintains being the water and wastewater utility, and starting an administrative fee associated with that.

The second item that we're doing is starting the right of way rental fee for the combined utility system.

These two items are standard practices in major cities throughout Texas.

They help align costs with service and they help to support moving towards a structurally balanced budget.

So to get into details on the solid waste proposed changes, um currently we have the water and wastewater enterprise fund at the city, which is part of the combined, which is the combined utility system.

So the idea is that under state law, Chapter 1502, solid waste can be part of the combined utility system.

So we're going to reorganize the solid waste department as a division within the Houston Public Works Department, and the combined utility system will now be the fund that the solid waste operations are funded from.

In order to support that transition, we're going to propose a gradual fee, which will start at five dollars per household per month, and will uh the idea is that we'll it will slowly increase over time, be five dollars per household per month for the first two years and increase by five dollars every year after that.

And we have some more details in the next slide.

By bringing in that funding as well as combining it with the combined utility system, it will support the solid waste operations in terms of replacing fleet, helping with staffing and reliability of the system, and also addressing the long-term neglect that both the transfer stations and the residential, or sometimes we call them the neighborhood drop off centers have had.

So moving to slide 15, the details of the fee in fiscal year 26, the solid waste department's budget is approximately about 107 million dollars, and this $5 administrative fee is only going to apply to the roughly 400,000 customers that currently get the residential collection.

If you only just look at the solid waste department's operating budget and approximately divide it by the 400,000 customers, it comes out to approximately $25 dollars per household per month.

We also went through the Burns and McDonald's study, which that that final report is available on the website just as of today.

And that study shows that the simple math calculation aligns with what the fee for the full cost of service would be with that department.

I'm going to talk a little bit more about the study further on in the slides.

So just in terms of what the fee looks like again, starting off at $5 per household per month.

And the idea of starting off with $5 per month is to minimize impact to the households and to make sure not to shock them right away, right, with a $25 right out of the gate.

So the idea is to start off with $5 per household per month, increasing over time.

Of course, along the way, we have, like I mentioned, the Burns and McDonald's study is a cost of service study.

So we would want to make sure that that wherever the fee ends up being in the long run is appropriate based on the costs that it is to provide the service.

So that would be something that will be looked at at a regular basis and would be brought forward to city council at that time to make sure that the fee being charged is appropriate in alignment with the cost of the service.

So for the first few years, the idea is that the current enterprise fund, the combined utility system, will subsidize the total cost of performing the service for the solid waste operations, with the $5 per household per month, helping to offset that cost.

And it's important to note that we call it the an administrative fee, and I just want to go into the next slide to explain what more about what that means.

So on slide 16, and this is a screenshot, it's an excerpt from the Burns and McDonald's study, which again is now available on the website.

On page 6-13 of it, they break out well through all throughout the report, they break out components of the fee.

They break out how much of the overall fee is it for residential collection, how much is for recycling, how much would go towards roll-off dumpsters, illegal dumping, all of it goes together to calculate an overall total fee of the entire solid waste operation.

The component of that fee that relates to administrative cost comes up to $7.57.

So the idea is to start off by not even going up to the $7.57, but rather setting the $5 fee, which will recover most of the cost of the administration of the solid waste operations.

So going on to slide 17, this gives a snapshot of what the major cities throughout Texas as well as the surrounding cities around our area charge for their solid waste fees.

As you can see, the $5 fee is well below the low end of the range of the fees throughout the state.

Again, the $5 is the administrative portion, and the other cities, this is really more of the full cost of service for their operations.

You see a range on some of the cities because some cities, like Austin, for example, has a pay as you throw model, so the larger of a trash can you get, if you have the largest one is $65 a month, you can opt in their operations to get a lower can and only pay $28 a month.

So that's why you see a range on some of those across some of those peer cities.

So moving on to slide 18, the right of way.

So this concept is not, it's not new throughout the state, and it's not really new technically with the city of Houston either.

So we don't currently charge our water and our wastewater utility system a right-of-way fee, but we do charge a similar fee to all of the other utilities that use the city's right-of-way for their operations.

So for example, center point electricity, natural gas, cable TV, telephone, these are all entities and utilities that charge are charged franchise fees that comes as revenue to the general fund.

So the idea with this concept is that public streets and public right-of-way are shared public assets that belong to the constituents of the city of Houston, and that when these utilities use those public assets, the general fund should be compensated for them.

So what we're proposing is a $5, sorry, 5% of gross revenues of the combined utility system's gross revenues, and that will come out to about $104 million for fiscal year 27.

Again, this is another fee, another area where every other major city in Texas has a fee that's similar to this for their water and wastewater system.

So on slide nine, this gives you a snapshot of what those other cities are charging and bringing in as revenue to their general fund.

So San Antonio owns their electricity utility and they charge their electricity utility 14% of gross revenues.

They charge their water utility 4% of gross revenues, and Dallas, it's the water system is 6% of gross revenues, plus a payment in lieu of property taxes.

Austin Energy charges 12% of gross revenues.

Austin Water, 8% of gross revenues, Fort Worth, 5% of gross revenues, and El Paso 10% of gross revenues.

And as we know with the city of Houston, we don't currently charge this fee to our water and wastewater utility.

So to put it into a frame of reference, though, using San Antonio as an example, San Antonio for their general fund, between what they collect from their electricity utility and their water utility, is they bring as much money from their utility as they get from property taxes in the city of San Antonio.

Okay, so now we're gonna go on to the more of the slides that you're used to seeing as part of the five-year forecast, just to give you the overall snapshot of including these two major changes we're doing.

Where does that land us with the general fund?

So on slide 29, this gives you an overall view of the entire city budget broken down by fund type.

We have the general fund, the water and sewer fund, and this is the expenditures comparison.

We have the other funds, which would include special revenue funds, and then we have the aviation enterprise fund.

Um so as you can see when you add all the funds together, the FY26 current budget is about $7.1 billion, and the FY27 proposed budget is about $7.5 billion, a net change of about 5%.

So on slide 22, um, we of course focus on our expenditure budget, but we also have to keep our eye on the long long-term liabilities of the city.

Um so just wanted on slide 22.

Thank you.

Wanted to touch on the pension reform.

That was a very important initiative that we have a slide later on.

Um we are saving literally hundreds of millions of dollars a year that the in the general fund alone that the general fund would have to be paying towards pensions had we not undertaken the pension reform back in 2017, almost 10 years ago.

So that pension liability was about eight billion dollars, it now stands at 1.7 billion, and the proposed budget includes contributions to all three of the pension plans that continue to work to decrease the long-term liabilities over time.

So it's something that's important to keep the three pension systems in a very healthy financial place so that we can ensure that the retirements are available for our retirees for the municipal police and fire pension plans.

Moving over to the OPEB reform, this is other post-employment benefits.

This is another long-term liability of the city that currently stands at 1.8 billion.

You might remember we underwent OPEB reform back in 2021 and 2022 that sought to bring down the liability over time.

Part of that initiative was to create an OPEB trust fund, which we just instituted last year.

It was a budget amendment by Council Member Alcorn.

Um it was something that we had discussed for years.

Um, and finally, with fiscal year 26, are getting started with that.

So with the trust fund included in the FY27 budget, there is a contribution.

Uh, last year it was 10 million, this year it's 12.5 million, and the plan for future contributions increases by 2.5 million per year to put that money into a trust fund that will save and grow through investment earnings funds that will in the future offset pay issue go costs for retiree health care.

Based on our plan for the planned contributions in the future, it's estimated that the trust fund will allow us to reduce the liability down to 1.1 billion dollars in the next 20 years.

On slide 23, this gives you a snapshot of our FTEs at the city.

One thing to pay attention to on this slide is the civilian positions looking, and this is again just for the general fund, but looking at the civilian line from fiscal year 26 current to fiscal year 27 proposed, you do see a decrease there.

That decrease is primarily due to the solid waste department, 393 FTEs moving from the general fund into the combined utility system enterprise fund as the solid waste operation becomes part of that utility.

You see that the police classified headcount is projected to increase as we are budgeting for five cadet classes to bring additional police classified online.

And the FIRE classified, as you can see, we've made a lot of improvements over the last couple years, starting from around we were at about 3,600 FTEs of fire classified back in 2021, and now we're projecting to be you know right around near 3900 in fiscal year 27.

On slide 24, just some highlights of the general fund budget.

The general fund budget, based on the proposed budget, the fund balance stands at about 10.5% of fund balance of expenditures, not including debt service and pay issue go transfers.

This is above the minimum of 7.5%, and it's about 77 million above that minimum threshold.

The budget includes contractual increases for the municipal fire and police classified as well, and those are in line with the contracts that are currently in place.

For the cadet classes, we really wanted to focus on making sure that we continue to recruit and retain our classified.

So for the police, we're budgeting for five cadet classes, and the plan is to have about 75 cadets per class, and the idea is to get an additional 375 cadets graduated through the academy for police.

For fire, you see 11 cadet classes, and this is a large number of cadet classes.

And the reason that it's so large is that many of these classes are going to be, and the fire chief can talk more in the operations about it, but they're going to be what we call fast track classes, which will really allow us to bring back people that are either already trained and coming from another jurisdiction or possibly rehires back to HFD that have been through the full academy before, and this will allow us to get them online as classified firefighters more quickly with all the proper training for fire certification and EMT that's needed to perform that important work.

The budget also fully funds the three pension systems based on the cost corridor mechanism that's in state law after pension reform.

And the general fund budget, importantly, I know we've had a lot of discussion about overtime costs around the horseshoe.

We really wanted to take a look at different approach at how we budget for overtime, still understanding that generally we have savings in either base pay or other areas that can help offset the cost of overtime in those departments, but we did want to find a middle ground between what we had previously budgeted and where we think the ultimate number will end up being so that we have a better reflection in the budget of where we think that overtime is headed.

So for classified police, we've added an additional $6.6 million of overtime compared to last year's adopted budget, an additional $9 million for classified overtime for fire compared to last year's budget.

The budget also includes a small fund balance drawdown of about $25 million as we continue to work on efficiencies and further expenditure reductions to prepare for fiscal year 28's budget.

The budget does not include any one-time land sales or payment deferrals, and it includes importantly the replenishment of the budget stabilization fund in fiscal year 2027 for the funding that was drawn for the Derecho and Hurricane Barrel.

Moving.

Moving on to slide 25.

This gives a breakdown of the general fund revenue in terms of what the FY27 net change is compared to FY26 estimates.

So as you can see, the overall revenue for the general fund increased by 4.95%.

The largest category that the increase was in is in the intergovernmental category, and this is primarily due to the right-of-way rental fee coming from the water and wastewater system based on the 5% of gross utility revenues.

The second largest area is related to property tax.

And we have some more slides on explaining the property tax figure.

Looking at sales tax, we're projecting a 21 million 21 million dollar increase from the prior year.

And then there's a host of other smaller items that equal up to the total increase in net revenues of 49 million dollars, with details in the notes below.

And we'll dive into each of those subcategory areas to get into the details on each of those major sources.

So on slide 26, this gives you a view of the general fund revenues last year compared to this year for property tax.

Again, it's an increase based on the whatever the assumed taxable value growth is from the appraisal districts.

Sales tax again, an increase of about 20 million dollars.

Other revenues, that category is where you see the combined utility system right-of-way rental fee is in that other revenue category, which is the cause for that increase in that category.

And franchise fees are about flat.

So moving on to slide 27, this gives you a historical view going back to 2019 of the breakdown of the revenues.

And so one important piece to talk about with the combined utility system right-of-way rental fee for the water and wastewater system is that it does allow us to help continue to diversify our revenue breakdown.

So right now we're very reliant on property tax being over half of our general fund revenue, sales tax, which as we know can be volatile, is another about a quarter of our revenue, and then the franchise fees and other fees and charges for services make up that remaining 25%.

So it's really going to allow us to kind of diversify that revenue stream to help you know minimize impact and economic shocks that can come with some of the more volatile streams like sales tax, for example.

So on slide 28, just as a refresher for everyone to dive into the property tax side, I think everyone here knows we talk about it all the time that our tax rate has gone down by almost 20% since the time we hit the proposition one cap back in fiscal year 15.

Back in 2015, the tax rate was 63.875 cents, and now we're around 51 uh 51 cents, 51919.

On our property tax revenue, we are limited by our local cap and the state cap.

Generally, our local cap, or so far historically, our local cap has been more restrictive from versus the state cap, but it's something that we need to continue every year to calculate both caps to make sure that we're complying with both.

So for proposition one and H, we have to be the lesser of the 4.5% growth from the prior year's revenue, or uh CPI plus population increase from the prior year's capped amount.

So we have to do two calculations on that side, and then we do another calculation on the state cap side where we can only increase our revenues by no more than uh three and a half percent, our MO revenues more than three and a half percent plus our debt service tax rate.

Um so that's something that uh has continued to be a challenge for us, but is something that we obviously still perform all the calculations and make sure that we are proposing a budget and adopting a tax rate in compliance with all those limitations that we have.

So on slide 29 to talk specifically about the fiscal year 27 proposed property tax revenue, we're budgeting about 1.5 billion dollars for property tax revenue.

Again, it's an increase of 50 million compared to the FY26 estimate, but it assumes no increase to the tax rate and keeping the tax rate the same at 51919, and this increase in revenue is only attributable to the assumed growth in taxable value as set by the appraisal districts, which again, this we're using an assumption based on an early estimate that they sent us.

We won't know the final value until we get this.

Well, it's not even the final value.

Well, we won't have the initial role until later on in the summer, and that's what we really will use to adopt formally adopt our tax rate.

And the role does change throughout the year.

I say it won't even be the final because the role changes every month until we get to the June of the following year.

So just to talk about the assumptions that went into our budgeted amount of 1.5 billion, we are assuming that the taxable value for the city of Houston will be 353 billion.

And again, we're gonna receive further information later on in the summer to firm up that estimate.

The estimated taxable value net of the tax increment agreements though is 294 billion.

And so the revenue that we're proposing in the budget is about 20 million dollars below the Prop 1 and H CAP.

So to explain that a little bit better, we calculate the Prop 1 and H CAP, and then when we look at how much revenue do we think we can get, keeping our tax rate the same, based on the information we get on the assessed valuation from the appraisal district, we think that that puts our revenue estimate about 20 million dollars below the Prop 1 and H cap.

Again, we're still waiting on some information from the we have the we have the information on the inflation that we use for the Prop One CAP, but we're still waiting on the US Census Bureau information, which we'll get in May, and we'll finalize that Prop 1 and HCAP number at that time at that time.

And again, we are keeping our over 65 and disabled exemption at 260,000, which is what we had last year as well.

Slide 30 gives you a little illustration of how we came since this is definitely a different uh a different way to look at property tax for us.

We've been budgeting the Prop 1 and HCAP of property tax revenue since fiscal year 15.

So we wanted to provide a visual to show you the process that we went through and the analysis that we did to come up with what we're proposing as property tax revenue for this budget.

We received the April certified estimate from the appraisal districts, which said that they told us that our taxable value should go up by 0.9%, 0.59% compared to the previous year.

Generally, from the April certified estimate until the time we get the initial roll in the summer, there is a change as they continue to go through and look through those values and finalize their estimates.

Looking at a five, we looked at a lot of scenarios, a three-year average or five-year average, a seven-year average.

Um, we decided to use a five-year average, which is the amount that the appraisal district generally tends to change the role about 2.6% of an increase between April and the initial roll.

So when we add that together with the 0.59% from the April estimate, we assume that the initial role will be around 3.19%.

Again, this is an assumption until we get the final information.

Based on that, that's how we came to the value of $343 billion.

Once we net out the TERS taxable value, and then we multiply that net value by our tax rate of $51.919, we come with the proposed property tax revenue of $1.5 billion.

So again, this is a little bit of a different method, a different way for us, because we're used to just budgeting at the Prop 1 cap, and we'll set the tax rate later.

At this time, we are taking what we know the tax rate is, the current tax rate $51919, and an estimate of the role, and then coming up with the revenue that's associated with that.

So moving on to slide 31, trends in property tax revenues gives this gives you a snapshot of what's happened since 2023.

You can see for the last consecutive three years in fiscal year 26, 25, and 24, we've collected below our budgeted amount of property taxes based on collections and as well as keeping the tax rate the same in fiscal year 25 and fiscal year 26.

On slide 32, this shows you how much revenue the city has foregone since we have hit the revenue cap.

While the bar chart only goes back to fiscal year 20, the cumulative amount, the cumulative impact that the revenue cap has had on the city since fiscal year 15 is a foregone revenue of 2.9 billion dollars that otherwise would have been collected if the tax rate had been 63.875 cents since fiscal year 15.

In fiscal year 27 alone, the impact of the revenue cap on the city's revenue is 379 million dollars for fiscal year 27 alone.

Just to touch on how that translates to the average homeowner, based on the revenue cap, the estimated annual revenue cap tax relief for the average homeowner, and this is based on a home value of about $320,000 is about $419, and the cumulative savings since the inception of the cap over 2015 is about $2,916 that someone that had a $320,000 home will have saved.

On slide 33, sales tax moving over to sales tax revenue, which again is our second highest revenue source for the general fund.

Our assumption is that the sales tax for fiscal year 27 will be a 2.4% increase from the FY26 estimates.

Some of the main drivers that we include in our internal regression modeling are employment, consumer spending, and oil and gas activity, which is important for our region.

We are expecting to see an increase in sales tax earnings, particularly in the first quarter of the fiscal year, due to World Cup activities happening, in addition to our our just our natural growth.

We of course continue to closely monitor this, and I give an update every month in the monthly report about our receipts and how we're trending with our estimates.

So on slide 34, this gives you the picture of sales tax revenues since fiscal year 23.

You can see that we have budgeted conservatively every year, and each of those years we've collected above our actuals have come in above what we have set in our adopted budget as our goal to collect.

And so for fiscal year 27, again, we're using what we feel is a conservative, the same methodology we've used in the past and our regression model.

We have our internal model that shows we have a pessimistic, a likely, and an optimistic scenario, and every year we take the average between the pessimistic and the likely scenario.

So on the bottom sort of end of the range, and that's where we're proposing the 942 million dollars.

On slide 35, this shows you the monthly sales tax collections.

Based on information that we had as of yesterday, the remaining months for fiscal year 26 would have had to come in 1.24% below prior year to meet the finance department's current estimate of 920 million.

We got more good news on sales tax today that our receipts came in above budget.

So that number now is for the remaining three months, the actuals would have to come in about 3% below prior year in order to hit our estimate of 920 million.

So we do see that we probably will increase that estimate by the time we get to the end of the year above the 920 million dollars that we're currently showing in the monthly financial report.

Okay, so we're going to move over to the expenditure side of the general fund budget now, and looking at slide 36, shows a breakdown of what the fiscal year 2027 general fund expenditures are compared to the fiscal year 26 current budget.

You can see that we are planning to decrease the budget by 11 million dollars or 0.35%.

The largest driver of that decrease is the solid waste department being restructured as a division and reorganized within the Houston Public Works Department in as part of the combined utility system that generates a savings of about $104 million dollars in the operating budget.

Additionally, even though we're increasing the upper of the adopted budget for the overtime for fire and police, it is still below what we see the actuals coming in at at fiscal year 26.

But again, as we go through the year, we usually have savings to offset those things.

So that is accounted for in the fiscal year 27 budget.

The third line item is a budgetary reduction that the departments went through their 10% reduction scenario exercises, and we were able to go through those proposals from the departments and have the administration review those and move forward with about $12.6 million in reductions based on the efficiency initiatives that the departments are going to be doing.

That results in what looks like a savings in the general fund of 10.5 million dollars, but really it's a realignment of the same programs across the general fund and the special revenue funds for the health department, where we realigned both the expenditures and the revenue.

So there's a net zero impact to the bottom line for the general fund, but it's going to allow the health department to really more closely see the expenditures and the revenues for certain programs in the appropriate fund.

And so there's a there's quite a long list of items on here, but just going down the list, I'll touch on some of the increases, the 89.9 million dollar increase in employee compensation.

This is to add to primarily the police and fire department for their contractual increases in alignment with their contracts, as well as the HOPE contract for the municipal employees.

Pensions, $19 million increase.

This again, this is associated with the employee compensation per the contractual obligations.

Another major item dropping down to the second subcategory is for the captured revenue transfers to DDSRF.

So this is an increase of $31 million, more going towards the DDSRF infrastructure improvement for the streets and the drainage compared to last year's budget.

And this number is in alignment with the Jones and Watson settlement agreement.

So all of those items together are a net change in expenditures of about 11 million dollar decrease compared to fiscal year 26 current budget.

Slide 37 gives you a snapshot of the DDSRF revenue.

These are the DDSRF revenues that come from the advalorm tax, showing in the TEAL, the large TEAL section.

You also see the third party, which is primarily made up of Metro, and then the orange is the drainage charge, and you see with the red dashed line what the amount of money going towards DDSRF before the Jones and Watson settlement agreement was and what it is afterwards.

So as you can see over time, those resources going into the DDSRF to improve the streets and drainage continues to grow.

On slide 38, this gives you a breakdown of the general fund expenditures from FY26 current budget compared to the proposed budget for 27.

You can see public safety is the largest increase again with the contractual obligations for the police and the fire being included in that as well as the amount of money that we included in the budget to more clearly reflect where we think the overtime will end up by the end of the year in the debt service category.

You see it going down slightly, and part of that decrease is due to the debt service related to the solid waste department, will now be taken on by the combined utility system as solid waste moves into the utility fund.

All the other categories remained either flat or slightly down, with the exception of development and maintenance services, you see a large hundred million dollar decrease there that is reflective of solid waste moving out of the general fund and into the utility.

And the pay as you go is really the only other category besides public safety that increases, which this is reflective of the additional $31 million going to the DDSRF fund for the streets and drainage projects.

Slide 39 gives you a breakdown of our personnel and non-personnel costs.

So when we talk about the general fund, we talk about the fact that we are largely public safety, largely personnel.

And when you start looking at the rest of the budget, you know, it's it's that's the minority of the general fund budget.

So focusing on the middle bar, this breaks down the overall general fund budget being 62% personnel and 38% other.

Of the 62% personnel in the left stacked bar, 82% of that personnel is classified and 18% is civilian.

Looking at the blue boxes, the 38% that's non-personnel of the general fund budget, they that breaks down into about half being debt service and pay as you go cost for capital improvement projects and transfers to DDSRF.

And then the remaining 51% is where our other services and charges fall.

On slide 40, this gives you the historical view of our expenditure budget in the general fund over time.

You can see this year, as I mentioned in fiscal year 27, we have a decrease of about 11 million dollars compared to our current budget based on all those ins and outs we went through a few slides ago.

Slide 41 gives you the overview of the pension, the three pension systems, and how much we put towards the police, fire, and municipal pension system.

Again, all of our contributions for the fiscal 27 budget are in alignment with the state law and the cost corridor control mechanism put into place by pension reform.

The yellow box you see at the top is the amount of money that the general fund would have had to contribute and incremental funding had pension reform not taken place.

So as you can see, the city is saving literally hundreds of millions of dollars a year in avoided cost that we would have had to otherwise pay had pension reform not taken place.

Slide 42.

This is a visual representation of how we got from what we talked to, what we talked about leading up to the budget.

We talked about in fiscal year 27, we see around a 200 million dollar gap for the general fund budget.

And where we are now is around a 25 million dollar gap.

And this slide in a visual representation, although it's very tiny font, goes through uh sort of really line by line how we got from a 209 million dollar gap down to the 25 million dollar gap.

So just going through some of the line items in the revenue side, which is in the blue box, you see that we made some increase projections to our sales tax revenue of a few million dollars, franchise fees also a slight increase.

We showed a actually a decrease in our licenses and permits category based on trends.

Intergovernmental revenue is the one that went up the most, and again, this is really driven by the right-of-way revenue coming into the general fund for the right-of-way rental fee, charges for services, a slight increase in our assumptions, direct interference slight increase, a slight decrease in our interest projections, and then the other categories are kind of small in that revenue area.

Going on to the expenditure side, you know, we break down in here all the align items that both added to the expenditures and reduced the expenditures.

A lot of the subcategories are related to places that we that we are adding additional funds for, for example, uh related to our fire and police contracts, for overtime pay, for additional cadet technology and equipment pay, uniforms, a lot of things that are increases from what we currently had been projecting when we initially started looking at the fiscal year 27.

Moving on to the orange bar section of the expenditures, this is where you saw we decrease our projection of expenditures with the largest increase being due to the solid waste department becoming part of the utility.

With all of those things together, is how we get to the budgetary gap on the far right of the 25 million dollars.

And on slide 43, this gives you the same information in a slightly different format, but it has all the the facts and figures that tie to the to the graph and the previous slide.

So going on to slide 44, this is a snapshot of the departmental budget reductions for the different departments.

Each of the departments was asked to submit a 10% reduction scenario and ideas for how they could be more efficient with their dollars to either free up resources or accomplish the same work with, you know, either with fewer staff or vacant positions.

The majority of this is vacant positions, and again, this is for the general fund alone.

You can see that the police is the largest piece of the $12.6 million.

This is related to civilian vacant positions that the police department has that have been vacant for a while and are currently under review to be evaluated before they're filled in the future.

And each one of the department directors, that's the largest one, but each one of the department directors, when they do their department budget workshops, is going to speak to their budget in totality on the revenue and expenditure side, and we'll give detail about their savings in their individual departments.

On slide 45, this gives you the historical view of what the general fund fund balance has been since fiscal year 17.

We have a little bit different of a view.

I know we talk a lot about how our fund balance, particularly in 2022, 2023, and 2024, was higher than we are today.

We added information to the slide in the shaded orange bar that shows how much of that fund balance is due to the revenue replacement ARPA funding that we were able to save in our fund balance following the Treasury Department formula and what was included in our budgets.

So this gives you a historical view of the fund balance.

And for the fiscal year 27 budget, we are proposing to have an ending fund balance of 273 million dollars or about 10.5% of expenditures, not including debt service and pay as you go for fiscal year 26 on slide 46.

Um I know we've had a lot of conversation about overtime costs and other areas where the budgeting might have been a little aggressive or criticism on how we budget.

I know I talked about it in my MOFAR last week, but I wanted to put a slide on here to really kind of put numbers to what I was speaking of.

So in fiscal year 26, at the time we adopted the budget, we projected that the fund balance at the end of the year would be 304 million dollars, or about 12% of expenditures, not including debt service.

Based on the finance department's current projection, we see that fund balance coming in at 299 million dollars or 11.3%, and this is a difference of 4.9 million dollars.

So out of a three billion dollar general fund budget, even though we've decreased revenues on property taxes because we kept the tax rate the same, and even though we have increased expenditures and overtime that wasn't previously budgeted, we have other savings and other things that offset that in addition to a higher beginning fund balance than we thought at the time of the budget.

So all of those ins and outs, we are ending up 4.9 million dollars different than we were planning to at the start of the budget.

Again, $4 million difference out of a $3 billion budget.

So when you look at the totality of the budget and all the ins and outs, we're really right on point with that.

Um and I did put another um handout on your on your desk that shows, as of the controllers' trends report, at the time we did the adopted budget last year, his office gave a range of anywhere between $37 million to $220 million for the fund balance.

So his projection, even you know, kind of the closest one to where we are at around $220 million, and again, we're ending up at $299 million.

So there's always a range, right?

Um, when you look at it, but I think the finance department does a good job of looking at all the different categories, all the ins and outs, looking at conservative revenue projections, how we how we budget for expenditures, and at the end of the day, the bottom line, you know, the fund balance is going to be within four or five million dollars based on the current projection.

So going on to the five-year forecast, and this is where we kind of give the out-year view of where we see things going.

Based on the five year forecast, we're going to show the projected gap based on a concert based on different revenue growth assumptions that you'll see broken out in the key assumptions on slide 49, but we'll get there.

It does not include any one-time land sales in the out years.

It assumes that we comply with Prop 1 and H limitations and that we keep our senior disabled exemption at $260,000.

It assumes that we contribute our pensions based on the cost corridor mechanism and state law.

The expenditures include all of our legal mandates, our staffing, and our contractual escalators that are currently known.

So on slide 49, this shows you on the revenue side for the five-year forecast.

We're assuming property tax valuation growth at about 1.95%, and again, that's based on the taxable value growth.

We have sales tax growth of about 2.4% for fiscal year 27, and the out years a range from 2.6 to 3.7.

Franchise fee, franchise fees tend to decrease over time.

So that's where you see actually instead of increases in franchise fees, it's it's a negative growth every year.

And then in other revenue growth, you see a range that we uh that we're using based in historical growth.

Okay, so on slide 50, this lays out the key assumptions on the expenditure side, with the fiscal year 27 proposed column showing where our contractual escalators are for the proposed budget.

The forecast for the out years is based on the known contractual obligations that we have in our current contract.

Um, and obviously it's to be determined once those contracts end, what those escalators in the future years could be.

On the pension side, we're assuming the the corridor midpoint for the municipal system as they have not yet hit 90% funded, they're about a 70% funded ratio.

And for the fire and the police pension plan, they're over 90% funded.

So we're assuming the midpoint of the corridor, or sorry, the minimum of the corridor, which is where we are today.

Um health benefits, we know we see that growing over time, so we've included an escalator there, and then uh obviously the assumption that we have for debt service and future transfers to DDSRF.

Um so on slide 51, um the green uh line shows you where we see the gap is today based on some of the structural budget changes we're proposing.

The red line shows you the baseline budgetary gap that we've been talking about, and the council member Pollard you asked me about, I think it was last week, of where we kind of saw that five-year number looking.

So before the structural changes that we're proposing, we saw that five-year gap by the time you get to year four and five, you know, in the four to five hundred million dollar range for fiscal year 27.

We were uh expecting around a 200 and nine million dollar budget gap with the structural changes that we're proposing in this budget, along with all the other moving pieces I talked about, the fiscal year 27 proposed budget.

The gap is sitting at 25 million dollars.

Um, and again, uh, once we draw that 25 million from fund balance in the proposed budget, that leaves us with 10.5% of fund balance.

Looking in the out years, you can see the major um the major impact these two proposed changes in the in the structural budget um plan will have.

It doesn't eliminate the gap in the out years, but it certainly puts it in a much much more manageable place.

In fiscal year 28, it would have it would reduce that assumed gap of 300 million down to about 100 million in 29 from 381 million to 130 million in 2030 from 446 million down to 132 million and in 2031 from 523 million down to 172 million so definitely we will still have some more work to do in the out years uh but with these two structural changes it really resets that baseline um and where we can go uh in the future.

So in terms of addressing the gap in the out years, you know, like I mentioned July 1st, we start already working on the next year's budget.

Um what's next in the out years?

We still know we have to contend with our property tax local cap and the state cap.

Um we know that public safety um makes up most of our budget and on the general fund side, and that is something that we need to preserve because it's of the utmost importance as well as infrastructure.

We also have to keep our eye on potential legislative changes.

You know, the legislature is going to begin meeting again before we know it, and so we always have to keep an eye on any changes they propose on property tax and sales tax, especially as those are some of our major streams.

In the short term, we're going to continue to implement the recommendations from the citywide efficiency study.

We're going to continue on with our hiring control, which is really making sure that the departments have sufficient budget to fund uh the positions that they're seeking to fill.

Uh, we're gonna continue to look for cost collaboration with other governmental entities, and in the short term, obviously we're proposing to implement the revenue source being the right-of-way fee and the transition of solid waste into the enterprise fund, removing pressure from the general fund.

In the long term, we know we continue uh need to continue to look to find ways to close those gaps in the out years, whether it's through developing new revenue sources, continuing to implement the efficiency study, and collaborating with our other partners.

And on my last slide, and my of my prepared remarks, um, just a screenshot of the letters of support we've had for our budget plan.

Um, I wanted to thank, I know I didn't thank him at the beginning, but the mayor's um the mayor's administrative staff, um, of course, the mayor, um, chief of staff Cynthia Wilson, Stephen David, Josh Sanders, um, the whole team, they've they've really done a lot to get us to this point and to engage with our internal and external partners on the budget in getting in getting everyone's questions answered as much as we can before we we even proposed.

Um there's also a QR code on this page to get to the FY27 budget proposal website.

That's where you can find a link to the budget book to the download of the raw data file for the budget for all the data nerds like me, like us that like to look at the Excel spreadsheet version of it.

Um, and there's also on there the link for the Burns and McDonald's study as well as a lot of other resources related to the FY27 budget.

So I encourage you to um to check it out if you haven't yet.

And that concludes my prepared remarks.

Thank you.

Thank you, Director.

A lot of information to cover there.

I do want to uh note we've been joined by a few other colleagues, Vice Mayor Pro Tem, Amy Peck, Councilmember Tarsa Jackson is online, Councilmember Carolyn Evans Shabazz is online, Councilmember Tiffany Thomas in Chamber, Mayor Pro Tem, Castex Tatum here in Chamber, along with Councilmember Davis.

On questions, the right-of-way rental fee starting at 5%.

Is there a plan to escalate that in the coming years similar to the administrative fee that starts at $5 and then escalates in coming years?

That would be something that we need to.

So I would say yes and so yes.

Part of that is contemplated in where we see resetting the budget gap on slide 51.

An important piece to that though is in conjunction with the budget, looking at how we can build guardrails into the utility documents.

So the master bond ordinance allows for this right-of-way rental fee to be charged.

When we look at all of our other peers and and uh around the state, when you look at their master bond ordinances, they set guardrails for themselves, basically saying, okay, you know, San Antonio electricity, you can't you can't be charged more than 14% of the gross revenues, right?

Um and so we see that a lot of those looking at those peers, we will uh recommend putting some of those guardrails in place so that you know we're we are although it can change in the future, there are those protective guardrails in place so that it can't you know extend beyond what we think is sustainable for the utility.

So that will come in the future with a policy that sets guidelines, yes.

And then on the $5 uh administrative fee, is that solely to cover or partially cover the $7.57 that is being incurred on administrative solid waste costs or how is that supporting solid waste?

Yes.

So that is a nice slide.

I'm sorry, a lot of slides.

16.

Yes, thank you.

So this is a SNP straight from the Burns and McDonald's study.

Um they do have a section where they lay out components of the overall cost of service, and based on their calculations, the administration portion of the cost is $7.57.

So the $5 fee will cover not all of the administration, but the majority of it.

So people shouldn't expect um, you know, salaries to go up for drivers or new trucks to be ordered with the $5 fee.

Well part of the administration administrative fee is part of the plan, right?

The other part of that, the other part of the plan with solid waste is the solid waste department becoming a uh division of the Houston Public Works.

So part of that is Randy and his team have already been meeting with Director Hassan and his team on what type of efficiency improvements can be made, including automatic routing, looking at the transfer stations that we have.

One of the major initiatives that we're looking at that has been in the, you know, been on the list of needs for quite some time is one of the transfer stations that we have that is not operational at all, is reconstructing and rebuilding that transfer station.

So with that, once that transfer station is back online and the design work has already been done for it, we're getting ready to award the construction contract as we get into the new fiscal year.

And of course, it takes time for construction projects, but once that transfer station is up and running, it will allow for a more efficient um uh basically routing of the truck.

So they don't have to drive nearly as far to um, you know, start their route, maybe they finish half of it, go to the transfer station on the other side of town, dump it go all the way back, right?

So it's really going to improve that efficiency.

So that's one example of the things that are going to be able to be accomplished with the solid waste uh becoming part of the Houston Public Works.

Um, so when you look at when you compare what was previously um thought or budgeted based on what we could afford for the solid waste operations in the general fund, you see that amount that solid waste is going to have going to it once it's part of the utility is a higher dollar amount.

So there will be more resources going, not just operationally from working together more collaboratively with solid waste and Houston Public Works, but on the funding side as well.

Thank you for that uh explanation.

And then on the key assumptions uh you talked about they're on slide 50 fire classified, are we assuming the uh pay escalator in this upcoming fiscal year since we had to pay it in the this fiscal year?

So in the fiscal year 27 proposed budget, we're not proposing, or we don't see that we have new additional revenues to cover the cost of the three percent escalator for 27 in the proposed budget.

So uh we definitely are looking forward to collaborating with the uh with the union on that.

Um, based on the way the language is worded, we have to have joint efforts between the city and the union to identify revenues dedicated to public safety and an amount sufficient to cover the cost of the escalator.

So right now, based on the way the revenues look for the um for the public safety revenues, we don't see that new additional revenue that can cover that cost, but that's something that we will be working together in the future so that once you see that revenue identified, then that could be something that would trigger the escalator, but neither the revenues nor the offset the expenditures that will, you know, be offset by the revenues are in the budget.

As of the proposed budget.

Okay, thank you.

I'll um have some more questions on that when we have uh fire for the workshop here.

But uh next up is Mayor Pro Tem Castic Statum.

Thank you, Chair.

Uh Director, can you walk through um the administrative fee versus the garbage fee?

I've I've heard, you know, both um terms um thrown out there, and I want uh everyone to kind of understand the difference or how we're using administrative fee versus a garbage fee.

Sure.

So the the full cost of the solid waste department's operations as they currently stand would come out to on average about $25 per household per month if you if you were fully charging the cost uh to cover the services for the solid waste operations.

Of that approximately $25, a portion of it, uh the way the Burns and McDonald's study breaks it down.

Um is it just because we aren't charging the full $25 that we're calling the five dollars the administrative fee?

Well, when you look at how the fee is calculated, when Burns and McDonald builds up the whole fee, they build up portions of the fee that equal up to what it would cost to run the whole department.

So they break out what would be the monthly fee to just do um, you know, curbside uh garbage collection, what would be the fee to do the recycling collection, what would be the fee to do just to focus on illegal dumping?

And they break down every line item of the operations.

And of the operations, it would be seven dollars and fifty-seven cents to cover the administrative costs of the department.

And so that's when we call it the administrative fee.

The five dollars doesn't even fully cover the administration.

But we're gonna do the five dollars in administrative fee because we aren't charging the full $25, which would be a garbage fee.

I would say that once it gets beyond this seven dollars and fifty-seven cents, then it would be for more than just administration.

Okay.

And then can you explain why um moving solid waste to public works was determined as um advantageous financially?

Sure.

Um there are some more slides that weren't in my prepared remarks.

Um, I don't know if you can go to slide 56.

You have that.

Do you have anything past that?

Um okay, so there um, could you see if they can send the version that has the appendix slides?

Um so uh but just get to get your question.

So um uh looking at the combined utility system master bond ordinance, um, there's a section that lays out um what types of utilities can be considered part of the combined utility system.

Um based on that master bond ordinance, it references a section of the state statute, chapter 1502, um, that lays out different utilities.

Uh it talks about water system, wastewater system, um, electric utility which we don't own right for ourselves, but it also talks about a solid waste disposal system.

So the idea is that the solid waste uh operations or can become part of the utility um in compliance with state law and the master bond ordinance, and um be able to leverage the resources that the combined utility system has.

Um the idea is that the fund balance of the combined utility system, which right now is around 1.2-1.3 billion could help sustain the operation.

So that's where you see the idea in the future years.

The proposal is to slightly increase that fee over time to get to the point where the full cost is recovered by the users.

Okay.

And then my other question is there was conversation about a review by council before it goes up above the five dollars.

What what was that plan or thought process?

So this budget, the proposed budget is based on the five dollars.

Um every time we look at a fee, starting a new fee, increasing a fee, we have to do something called a cost of service study.

So that's what the Burns and McDonald's study shows that you know the five dollar fee is substantiated by this study.

Um even though you have a cost of service study, um, city ordinance governs what certain fees can be.

A lot of fees are on the citywide fee schedule where they go up by inflation.

Other fees come back to council for regular review for change and update.

So the ordinance that's going to come forward with the budget is going to establish the fee at $5, and future increases to the fee would have to be done by city ordinance.

And then one last question.

If people have private trash pickup, will they be exempt from the $5 administrative fee?

Yes.

So the $5 administrative fee is only going to apply to the $400,000 homes that currently have the residential collection.

And will the $6 rebate still remain intact for people with private trash?

Yes, that's part of the budget for the six dollar rebate to remain intact.

Um that's something that I think can be considered in future budgetary cycles, but for purposes of this budget, it's cut it's contemplated to continue in the fiscal year 27.

Thank you.

Councilmember Pollard.

Thank you, Chair, and thank you, Director, for your presentation.

Thank you to your entire team who put forth the effort to help with the presentation.

Um, going back to page 16.

The $5 fee, which is a part of the $7.57 of admin.

What constitutes admin?

Because you brought and then what what are the other line items that make up the $25 that would actually go towards trash collection?

Trying to find a good page in the Barnes and McDonald study.

It's a long study.

Sorry, might take me a minute.

Let's let her come back to that if you want to give it back to one of your staff members and go on with your next questions.

Just one second, let me have them.

Okay, as as it relates to the master bond ordinance, and right-away fees.

Does the current um ordinance allow for right-a-way fees?

Um, the C US as a as opposed to the city attorney earlier is paid for through bonds.

The bonds have specific language for the bondholders.

Will we have to refinance on those bonds to change the language?

And if so, could that impact our credit rating with having to go back to the bondholders with new language?

So two things on that.

We also did some initial outreach to the rating agencies to explain to them our thought process for the proposed budget.

We haven't received any negative feedback from them on that, although those were really you know preliminary conversations.

So now that the budget's released, we're going to have more deep dive conversations with the rating agencies.

So that's one piece of your question.

The second piece as it relates to the language in the master bond ordinance.

I have uh we have Eric Wynne from City Legal, who we've had him working over time as well, looking at all of these um all these proposals.

Um he can probably speak to it better than I can.

Um, but the master bond ordinance um does contemplate um things called any lawful system purpose and what is called the bottom bucket.

So the the right-of-way fee will be paid out of what we call the bottom bucket, which is to say after all the bond obligations are paid, all the other operating expenses of the utility is paid, there's a flow of funds in the ordinance, um, and the master bond ordinance does contemplate that, but I'll let um Eric fill in the legal details.

Sure.

And council member, if I understand your question correctly, I think you're asking what the bondholders have as rights um with respect to the cities being able to leverage at this right of way fee.

Is that accurate?

Yeah, I mean the bondholders um are investing in the bondholders are investing in the C US based on specific language, that specific language at the moment, I don't think contemplates right-of-way fees because we have not done that as of yet.

Uh so would the would the bond language have to change, would then lead to a refinance of the bond, and then would that lead to a change in the credit ratings?

Sure.

Uh we are contemplating a potential um bond transaction with an accompanying bondholder consent mechanism, um, but with respect to immediately being able to do a right-of-way transfer, the bond uh the master bond ordinance already contemplates a possible mechanism to do that.

Um I think as Melissa alluded to, there is a general flow of funds for how you can spend C US revenues that's contemplated for under the ordinance.

You don't need to amend it, you don't need to get bondholder consent.

You just do what the flow of funds says you can do.

And in this priority of how you can spend CUS revenue at the very bottom, um, or what she referred to as the bottom bucket, that's basically the CUS fund balance.

Um, this is after operations and maintenance have already been paid.

This is after the bondholders have had their bond fund um fully paid, which means that the debt service payments are taken care of.

And at the very bottom bucket, you have this category called the general purpose fund, where the city is allowed to pay for um any number of categories in there.

And one of the categories is called any lawful purpose of the system, as the city may determine um at its own discretion.

So as long as it's as long as it's a lawful purpose of the C US, um the city can spend C US revenues to pay for that purpose.

And this would be, you know, the underlying justification for the right-of-way fee.

Okay.

If you want to go ahead with the administrative, then we'll put you back in the queue with what the Burns and McDonald's said.

Yes, and I wanted to add one thing to what Eric said.

When Eric said any lawful system purpose for the utility, there's a section in state law also in um chapter 1502 that talks about the transfer of a utility uh transferring money to the municipalities' general fund.

Um, and so it it also focuses on this concept in state law, which is how our utility is governed in this um chapter 1502.

Um on the administration fee, um there's more details on page 3-2 of the Burns and McDonald's study and three-three of the study that lay out how much the administration is as a component of of the operations of the system, but I mean, administration is administration is what it sounds like, right?

Like overhead for um staff, um to pay invoices, to collect revenues, billing.

So will it go towards so it doesn't go towards actual garbage collection operations services?

It goes only towards Administration.

Back office, overhead.

So it's safe to say then residents who are paying this initial five dollars until it gets increased or when it gets increased, they won't see an improved trash collection service.

Is that safe to say?

I wouldn't say that, no.

So what would you say?

I would say that there's the administration fee, that's a piece of it.

The second piece is the reorganization of the department into the public works department.

So they've already started on working on things like uh route automation.

They used to, or maybe in some cases still do, I'm not the expert of operations, but work off of paper route maps versus dynamic routing that can be done similar to a way like a FedEx or an Amazon, right?

Does that have to do with the $5 fee?

She described a lot of this in her presentation.

Uh, that the lot of the the operational efficiency, the lot of the operational gains are gonna be by virtue of putting it into the utility.

That's what I heard earlier.

Not specifically about the fee, but let me put you back in the queue.

Councilmember Thomas.

Thank you, Madam Chair, hi Director.

Okay, question.

So in my six years of service, there are probably only three votes that I still think about.

Uh, one of the votes is of the 2021 consent decree.

So uh, and we negotiated that down.

You you were very familiar with that, and we went to Houstonians with a very prescribed method of how we were going to address consent decree.

Here's the schedule, here's the fee, this is what you can expect, then here comes a rate study, and then it was like eight percent through the game off.

Uh then we just have an increase every April one and every civic club meeting, every HOA meeting I go to, people are still talking about water bills and how the fees um they can't afford them, right?

Um seniors were who had a $50 water bill, now they're dealing with something else.

Um this reminds me of consent decree.

In the sense of, you know, do we have a promise that we will not have to go back to Houstonians saying, oh, we've done another study, we looked at what other cities have done, and they increase their fee three percent every year.

Philadelphia does it, San Antonio does it, because this is what reminds me of that.

Uh Chairwoman, you were we have voted in support of that, and I know we delayed that vote six months because we voted on that in the midst of the 2021 freeze.

It was so quick, and I remember talking to Mayor Turner about that.

I remember Vice Mayor Pro Tim even raising issues around the fact that people were trying to figure out dealing with the pandemic and the loss, and we find ourselves in very similar economic times when people are making financial decisions.

So is there a promise?

Because I voted in support of that, and I still stand by that, but I'm also I also still meet those constituents that are dealing with that financial burden.

Is there a promise from the administration that we will not go back to Houstonians and say, ah, I know it's $25, but we've done another study and now it's 35, and we're gonna scale up in the next five years.

So the rate study, the water rate study is something that is important to the bondholders.

So um councilmember Pollard asked about the bondholders.

The rate study is something that um, as you know, because we engaged a new consultant, Raf Tellis, whose contract came to city council some months ago, has already started on the future water rate study.

An important part of this plan and the five dollar administrative fee that we're talking about, right, is looking at the current balance of the combined utility system and seeing that the utility can support the operations of the solid waste department, right?

But over time that that solid waste, the five dollars really to be sustainable for the utility to support it, that fee does need to go up so that it's not tied to the fund balance of the utility permanently.

I think yeah, after we right after we hit the the 25 dollars, in order to have any type of fee, there is a cost of service study, and the like the Burns and McDonald's study, right?

And another piece that we haven't even haven't talked about today, but it's been something that we've talked in some of the briefings about, um, are some of the ways that Public Works is already working with solid waste to become more efficient in their routing, right?

The routing, the operations of the transfer stations.

The fact that we only have two operational transfer stations, and I mentioned that third one coming online, that will help with operations and routing.

Transfer stations are also a potential revenue generating opportunity.

But after once we hit our $25, is there a promise from the administration that we will not have to go back to Houstonians to say ah, we've we need to increase another three percent on this on this $25, although we told you $25 over five years, because then we're you know, we we're stuck holding the bag.

Most of our fees are at least related to the CPI escalator.

I mean, in the future.

So, from the perspective of Mayor Whitmire during his administration, the cap is going to be $25.

Uh what Director Dabowski is referencing is that any increase beyond $25 would have to be supported by a rate study.

And I think the thing that we can all get behind.

So the answer is no, there is no promise.

The answer is there is a promise.

We are not going to go above $25 during Mayor Woodmost.

Unless there's a rate study, unless you come back, because we do a rate study for the wire.

Mayor with my commitment is that we're not going above $25.

Unless we do a rate study.

Or period.

That's it.

Okay.

The thing that I'd like to reference the thing that I would like to reference, and this is an important thing to frame out is that we do not believe that the $25, the $25 calculation that was made during this analysis necessarily assumed that the department was efficient.

And we do not believe that that is true.

I don't think any of y'all believe that that is true.

So what we do expect to occur is that as $25 is highlighted as the cost of the department today, we believe that the cost of the department will decrease over time because we're going to be driving more efficiencies into it.

It's one of the reasons why I'm a little hesitant to say $25 because it's the max.

We think that it's going to be cheaper.

And then the conversation that we do fully expect y'all to have in the next couple of years as we contemplate going from five to ten dollars is if it turns out that the actual cost to administer to the actual cost of a garbage fee is let's say 19 or 20 dollars instead, would this council prefer to keep it at twenty-five and add a second garbage day during the week?

Or maybe do recycling more often, or maybe do heavy trash.

That is a policy decision.

That is not something that we're contemplating on doing with this budget.

Councilmember Ramirez.

Thank you, Madam Chair.

Thank you, Director, and the entire finance department.

This is a huge lift and uh quite an accomplishment.

So I appreciate all your efforts on this.

So I want to start by asking you uh about the budget gap slide, which is 51.

In the out years, the green line uh much more favorable than the red line, obviously, but in FY 2029 revised gap, 132 uh million.

Does that assume a ten dollar administrative or garbage fee, whatever you want to call it?

So this only looks at the general fund, so it assumes it's it's not exactly baked into this number because it assumes that the entire cost of the solid waste operation is now outside of the general fund.

So the five change from five dollars to ten dollars would impact the utility, not the general fund.

Okay, thank you for that.

Yes, all right.

Let me ask you about uh, well, one of the two centerpieces of of the plan is solid waste becomes uh utility, gets designated as a utility.

Does that happen simultaneously with the passage of this budget, or we to consider that in an in a year or two?

Yes, it's gonna that the proposal is to have it happen simultaneously with the budget.

I see.

And slide 16 is uh sort of a page out of the Burns and McDonald rate study.

There's mention on that slide.

If the city if the city chooses to transition to a special revenue fund, blah, blah, blah, blah, if uh SWMD becomes a combined utility.

So we've made the the administration has made the decision we're gonna go the utility system route, not the special revenue fund route.

Yes.

Okay.

Um how did how did the administration uh settle on a five percent of gross revenue right-of-way fee as opposed to something else?

Um so we've been working with the public works department to do a lot of internal modeling um to look at what the utility could reasonably afford given their um current fund balance, their current days, cash on hand, their current debt service coverage ratios, all of which are important pieces to keep an eye on, and also looking at the um the existing needs of the water and wastewater system.

So making sure that it was something that was affordable based on the large capital improvement plan that they have to put forward with the East Plan and the consent decree that council member Thomas mentioned, um as well as the operational needs of the utility.

Um they do have also an aggressive plan on um water line replacement, as you know, and Andy can speak better to the numbers than I can, but um they've done a lot of um repairs and reducing those water main breaks.

So contemplated together with all of those other things, making sure that the utility uh is still meeting its operational goals and the capital projects it needs to do.

Um we felt that a five percent fee was something that was affordable and and sustainable for the utility for fiscal year 27.

So is there uh a cap?

Because I see from slide 19, it goes anywhere from San Antonio water 4 percent to San Antonio CPS 14 percent.

Um there's not a cap currently in our ordinance.

Um that is something that we're looking to um contemplate as having part of the master bond ordinance uh to make sure that there are guardrails in place to make sure that it's affordable and sustainable for the utility.

All right, thanks.

I'll go back in the queue.

Vice Mayor Pro Tem Peck.

Thank you, Chair, and thank you, Director, for the presentation.

Um for the administrative fee, does moving the SOLICE um department over to the combined utility system have any impact on the um Prop 1 and H cap?

Like does it change the CPI at all?

I know it's the lesser of that or 4.5%, but I'm just making sure that it doesn't change any calculation that would then raise property taxes in any way.

No.

Um no.

So um the the way that the property tax um cap works is based on the property tax collections from the prior year, not necessarily what you expend in the prior year, but more so on the revenue side.

So it doesn't um it doesn't change that calculation.

Okay.

Um for long-term liabilities, um, what is the most recent estimate for deferred maintenance?

I know when we talked about it last year for FY26, um, deferred maintenance for city facilities was estimated to be 760 million dollars and 1.4 billion over the next five years.

Has that number changed at all since last fiscal year?

So uh generally GSD would um provide an update on that.

I think in their um in their department budget workshop.

Um, one thing that is gonna be a major change and probably won't be reflected this year since they are still um on the books, is as we get ready to move to 1600 Smith, all the deferred maintenance associated with 1200 Travis and 611 Walker, you know, those are going to be um buildings that we move out of, so don't have to tackle those hundreds of millions of dollars of deferred maintenance.

So I would say GSD can can give a better update on that, but again, keeping that piece in mind about the move to 1600 Smith may not be in those figures yet.

Okay, thank you.

Yes.

Councilmember Davis.

Thank you, Madam Chair.

Uh Madam Director, thank you for your presentation.

Very intense and certainly covered a quite a bit of the area.

Um, and uh sort of all of the team that work with it, great job in helping us to understand some of this.

I wanted to ask a question concerning slide 24.

Um the general fund budget.

The you expressed earlier, you mentioned that part of this was gonna be seventy-five officers per class.

You were increasing it to 75 police officers per class.

Can I ask the question?

How many do we average now?

What's the average?

I attend them, you know, as well as the fire as many as I can.

So what it this is going to the projection was to increase it to 70 average of 75 new recruits, right?

So do you know what the average is now?

Um I don't have the average per class.

Um I know that we budget 75 cadets per class.

Yeah.

Um, and that overall percentage that we've seen graduating has increased.

I know we were getting to the point, even you know, two and three years ago before the new contract, um, that you know we were graduating classes that were maybe not even half full.

I'm I don't know if Doug was here.

I'm speaking off the top of my head.

Yeah.

Um, but we are definitely seeing a higher graduation rate overall.

So we are projecting that um based on the five classes and seventy-five cadets per class.

Um, you know, we don't assume that exactly all of them will graduate, but we but we are coming to about 375 new cadets by the end of the year that will graduate.

Okay.

And that and that and that would be good.

If we could meet that goal, it would be excellent in regards to um with the turnover that we experience.

And then 11 fire cadet classes is included in that general budget, right?

Yes, yes, sir.

Okay, okay, good deal.

So, um, the this budget it indicated it includes a uh fund balance drawdown for 27.

Um objective is to work on the efficiencies um expenditures for the for the next year.

Yes.

Is that right?

Yes, like I mentioned, we as soon as we pass this budget, we'll start to think about the following year's budget.

Um to try to, as we know, we still see those budgetary gaps in the out years that we need to try to chip away at as we get closer.

Well, I just wanted to comment because I thought that was a very good objective, you know, to be, because we know it rolls quite into the other one.

So thank you so much.

Thank you.

Councilmember Martinez.

Thank you, Chair.

Um I think for first and foremost, just want to say uh great job to you and your team on the budget.

Um, understand that the deficit we're looking at somewhere's around 174, and now uh only 25 million.

I think it says a lot of about what the work is that is really being done.

Um and just want to, you know, I know we're talking about what this five-dollar administrative fee um is is setting up.

Uh, but I think it's important to also understand that you know change is difficult, right?

Um, understanding how we reimagine a department that has historically been underfunded.

Um, you know, quite frankly, on the operational side has been, you know, really ignored as well.

Trucks that we're having out in the on the streets, 12 to 10 to 15 years when they should be fired to seven, uh, transfer stations that we couldn't actually be bringing in revenue.

So, you know, it's important that uh when we start re reimagining what city government looks like, uh, to kind of take a step back.

And again, the questions are gonna come up.

And although this is not an official trash fee, um, I am excited about it being a pathway to right size and solid waste department.

Um again, what that looks like ultimately as a as a trash fee if it were to come to fruition.

Uh pending all the operational um efficiencies that are gonna be coming forward and possibly even revenue that that comes forward.

Um, we still have to have these difficult conversations because we've known that for a long time uh the hundred million dollars that we're up to right now is not enough for solid waste.

Uh so um I think you know, when the conversations come up as well, uh, when is the right time to talk about a fee or the revenue cap?

I think no one around this horseshoe feels like it's ever the right time.

Uh, but quite frankly, it's important that we have that conversation more and more and more.

Um, you know, the the water fee uh that was voted on in 2021.

I don't think it was the right time either.

And I'll tell you right now, my wife gets upset with me when she says, look, the water bill is almost double.

Uh, but it was something that was needed.

The consent decree is what prompted that.

Um, but that was because of deferred maintenance that unfortunately uh past administrations were kicking the can down the road.

And so um I think my the highlight that I like to bring uh to folks' attention is the five year forecast um to show it uh really addressing uh really long-term financial stability to some extent, knowing that there is still work to be done, it shows that there's work to be done with the front the five-year forecast.

Um I'd like to see other efficiencies.

Uh one thing that I'm gonna be looking at is the parks department.

For me, the scope of service should be mowing, maintenance, and delittering these extra services.

And I said this before I'm a proponent of ASA school programming, but there's some things that government just cannot do, and I think it's important that we start finding nonprofits to be able to be housing some of our facilities, specifically parks, uh the parks uh community centers, to ensure that um, as we all know that personal cost is usually the highest in our budget.

How do we start uh reducing that that uh cost and finding ways where we're leveraging partnership and continuing to move in that in that pathway?

Um again, um, I guess one question that I have is the five percent right-of-way rental fee.

You know, it's done across the state.

Why why would why weren't we doing it prior to this year?

Um I know it's something that um director Paez um has been um talking about and championing championing.

She said for is she here today?

20 years.

Um because their department oversees the franchise fees, which is a very similar fee.

Um I first started looking at it when I was in the finance department back in 2018 and 2019.

Um at that point in time, the utilities um fund balance was not nearly as healthy as it is today.

Their debt service coverage wasn't as healthy as it is today.

Um, and it was under serious consideration in 2019.

Um, unfortunately, COVID happened.

Fortunately, we got a lot of ARPA and CARES funding that really sustained us through fiscal year, uh finishing out fiscal year 20, 21, 22, 23, 24, um until now we're finally out of those ARPA funds.

And so I think that was a big piece of it.

Um, uh it's been out there, it's been out there as an idea that's been looked at um many times and set to the sideburner many times.

Um, and I think uh, you know, we've done a lot of the low, low-hanging fruit, and it's it's now the time.

That's that's great to hear.

I know my the time expired.

I just want to say reimagining what city government looks like is important, um, especially because we've seen deficit for over 10 years and just really kicking the cat down the road.

So uh thank you for the work, and I look forward to this pathway to really make sure that our finances are more sustainable.

Thank you.

Councilmember Pollard.

Thank you, Chair.

Um, director on page 29.

It speaks about um property tax projections.

We are 20 projecting to be 20 million dollars below the property tax cap, both the local and the state restriction.

Why wouldn't we try to maximize and go to the cap max?

Um, in order to collect the full property tax cap based on proposition one and H, um, based on our assumed valuation that we're seeing from the appraisal districts, we would have to increase the tax rate above the 51 cents.

So to collect an additional 20 million would be probably around a penny additional of tax rate.

Um, so um, you know, that's that's one piece that we feel that um, you know, now is is not the right time to raise the property tax revenue.

Um, a penny.

Correct.

So we don't want to raise the property tax cap by a penny, so that the city can get additional 20 million dollars when the mayor consistently says that the city is broke and that we need to find revenue sources.

One of the issues uh that we faced, and you said this earlier in your today's presentation, that the property tax cap has been a challenge for us.

That argument is going to be difficult to make in the future for us to say that we're under these restrictive caps if we don't even reach the max of our cap when we have the opportunity to.

Those who oppose lifting the cap will say you guys don't even need to lift the cap because you don't even reach the cap in your current budget.

And I think that is a slippery slope to go down because you're gonna have to find one path or the other.

We can't say that it's a challenge for us, and then at the same time don't meet the max of the cap.

And especially if there's gonna be a shared sacrifice of one penny that can attribute to 25 million dollars of needed revenue.

Uh I think that is something uh that we need to look at.

As we um shift solid waste into the CUS.

What currently does the CUS pay for?

So um the CUS right now, uh the combined utility system is the water and the wastewater system.

Um, so right now um, and I mentioned it a little while back, um, that there are um obviously the operating budget of the combined utility system, so focusing on the water main breaks, um, the sanitary sewer overflows which have largely been taken care of, which were part of the consent decree, um, also the east plant.

Um, those are all things that are contemplated and you see planned for in the in the capital improvement plan.

So, one thing I was um talking about addressing to Councilmember Ramirez question is that through looking at this five percent right of way for the CUS that's really based on modeling what we think the affordability for the system can be so that they can continue to take care of the east plant and move forward with that um replacement.

Um, institute the capital improvement plan um that looks at I mean, you know what's in the capital improvement plan, there's a large lot of that large capital projects, but also focus on the operational needs of the department like um uh the ongoing maintenance of the water and the wastewater system that's already contemplated as part of the budget.

So all of those critical services for water, waste, water, maintenance, we're we're going to be shifting solid waste into it to draw down off that money.

Is that correct?

Temporarily out of the fund balance of the utility.

But when you look at the proposed budget for the utility, you still see all of those other ongoing operational needs are still contemplated in the operating budget that's proposed for the water and wastewater.

We are drawing down off of the CUS.

So the money that was there for water, wastewater, maintenance, all those critical needs that you just discussed, we're drawing down off of that to pay for solid waste.

Do you have the the slides that have the appendix slides now?

Can you go to slide um 54?

So on this slide, this slide shows for the combined utility system where the debt service coverage ratio has gone over time.

Um so you can see that um per our master bond ordinance, we need to have a coverage ratio in the 1.1, 1.2 times range.

When we did the rate study last um, we contemplated a uh coverage ratio between 1.2 to 1.3 times.

Right now, the coverage ratio sits at uh over two times 2.15 times.

So have people been paying too much into it?

No, no, they haven't been paying too much into it.

Um they have been paying based on what the the cost of service is.

So as I mentioned, there is still a large lot of operational um needs of the system that's contemplated for in the budget and the capital improvement plan, which happens over time.

A lot of the funding that comes in for the utility um is to pay for some of those larger capital projects.

So for example, um last week at Budget and Fiscal Affairs, I presented on a um a loan that we're gonna get from the Texas Water Development Board where we're able to achieve lower cost of borrowing.

Um half of that loan is a forgivable loan, so it's sixteen million dollars that we're getting as a forgivable loan from the state.

The rest of it is zero percent borrowing.

So a lot of things that um we're doing on the financing side where we can have a lower cost of borrowing is bringing down the overall cost to some of those larger projects, which frees up resources.

So I guess my question though is the C US pays for critical infrastructure needs to water wastewater.

We are shifting solid waste there to draw down off that, and then we are charging that same system for a right-of-fee.

So you're taking money away from all those critical head.

No, because you're still going to see those projects in the capital improvement plan moving forward, and you're still going to see those operational needs as part of this proposal.

But why do we have so much money to do that with?

Council Member Pollard, I've I've asked the same questions you're asking every which way, because I've been a big proponent for keeping infrastructure money in infrastructure.

I have been um convinced that these are excess reserves not being used for all of the above, all of the things you're talking about.

And then what's left, we have above the debt coverage ratio, and that those are the funds that we are using.

And I hear you, but over the last year too, I've always been hearing, and even before that, that water and wastewater infrastructure is in need of as many resources as possible.

And we we hear that time and time again.

So either that wasn't true, or people are paying into a system where we have all this excess that they really did not need to pay into at that rate because we have so much excess that we're able to do all of our current needs and have additional money to pay for outside needs.

So if we are to do this and justify this, that's basically saying we have more than enough money for our water and wastewater infrastructure projects that we don't have to say that that's a critical or dire issue anymore because we've been making it seem as if water and wastewater infrastructure has been a dire issue here at the city.

Stephen.

So both are true.

Um I think there's a little bit you're highlighting a good news story about this.

Uh but to answer your direct question, we are continuing to uh engage in all of the expected capital improvement projects.

We are not defunding or delaying any projects, and we are not going to uh we are not going to restrict any of the operating money that we are doing.

So there's two slides uh before you, and I'll make sure that you have I believe that you all already have them, but I'll double check to make sure.

The first one is the combined utility system debt coverage, debt service coverage ratio.

So as Melissa described in a scenario where we have to have we have 100 dollars of debt, we are required by our bondholders to carry 125 dollars.

Right now we're carrying 215.

So we are more than covering our debt obligations.

And on the OPEX side, on the operating side, we keep three, we are keep as a policy 300 days of operating reserves.

We currently carry 550.

The question that I think you're asking is why do we have that?

Are people paying too much?

And the answer is no.

When the rates were set in 2019 and in 2019, they they calculated it based on the cost of the department and the cost to do the work at that time.

Since then, under Randy as Chief Operating Officer, and then Randy as director, that department has become more efficient.

He has driven efficiency into the work order system into routing into the performance.

So we don't need additional money for water and wastewater, is what you're saying.

We don't are you saying we don't need additional money for water and wastewater?

That analysis is done during a rate study, which we're in the middle of right now.

And so what you're asking is you're asking me to get ahead of a financial calculation, which I'm not gonna do.

I'm asking you because you stepped up to the mic in a presentation that's not yours, okay.

And I'm asking you, are you saying that that excess money we didn't we don't currently need for water and wastewater infrastructure?

No.

Okay, we're gonna move along.

Um Mayor Pro Tem Cas Text Tatum.

Thank you.

Director, my question is, um, when we talk about that five percent on the right-of-way, is there any version of there being a cost passed to Houstonians or consumers in any way?

So the right-of-way fee.

We're talking about the right-of-way, the five percent.

Um as Eric described, it's contemplated for fiscal year 27.

It's going to be coming from the bottom bucket.

So the bottom bucket comes after the debt obligations, the OM expenditures, and is really what's considered um gonna use the wrong legal word.

Maybe Eric should help me fill in.

But to answer your question, it's after all of the other obligations of the system.

So, the answer is no.

It comes from the bottom bucket, and the money from the bottom bucket is is there based on the rate study that was performed and the rates adopted in 2021.

Okay.

So I I want I want to ask Randy it that question because yesterday somebody asked that question and you gave a response, and I thought I understood it better, but today I'm I'm still confused.

That five percent right away.

Um, is there any version of an additional cost being passed to consumers the way it's set up?

The way we have contemplated it here, no, and that's because it's being drawn from that bottom bucket as it is today.

The biggest shift that we're making internally involves internal financial models that we have.

For instance, you know, city ordinance says we keep 60 days of cash reserves.

Steven was talking about this.

Then we set an internal departmental policy that went to 300.

Today the fund has grown to 550.

Part of that has to do with the way the department has appropriated for its projects.

We have a major project.

Look, our capital projects are enormous, they're not your typical two million dollar, three, three million dollar projects here and there.

These are tens and hundreds of millions of dollars.

And the department's policy has been to appropriate all of that up front for a project that may take 10 years to deliver because of the size and scope of that project.

Well, that money now sits there, and these funds continue to grow and we build interest upon it, and it doesn't go anywhere.

So a big part of what this shift is is it's us also adjusting our internal financial policies to make sure that we're using the money wisely, and we're not making sure that we appropriate too much up front, which then diminishes our appropriations capacity later on that requires us to get different and more types of commercial paper along the way so that we can be effective in how we spend it.

There could certainly be a time in the future, not during this administration we contemplate, but there could be a time into the future where a rate study says that with the right-of-way fee you're going to have to have a different cost structure.

That's gonna contemplate all of the infrastructure projects so that we have already completed to this point because as we undergo the rate study with Raf Tellis right now, one of the things Melissa and I have made very clear to them is it is very important and critical to us that we are sensitive and do not raise those rates on single family residential, that we look at the holistic picture of how rates are structured, we make it in a way that people can understand and recreate their water bills, something they can't do today.

The formulas are overly complex, for instance, that we make sure that we reprioritize the right types and scope of projects that we have within the department.

You know, we talked about the consent decree a whole bunch today.

It's been brought up over and over again.

Um there are parts that consent decree that we're obligated to that don't move the needle on the purpose of the consent decree.

That's a fact.

It's our responsibility now as collective leadership to make sure that the city is putting its resources to the best and most effective uses that it possibly can.

This is one of those.

So we aren't going to see when when this when this goes into effect after the budget passes or when everything happens now residents have an additional fee because of this right-of-the-art.

You are correct.

Councilmember Ramirez.

Thank you, madam chair.

Um Director, let me ask you about something easy.

Overtime.

Oh, overtime, yes.

Easy.

Um, I know, I'm I'm I shouldn't joke about it.

So slide 24, there's a bullet point in there that says better reflection of where overtime will end up.

Classified police 6.6 million, classified fire, 9.1 million.

So let's let me ask you about fire.

So uh 9.1 million in the fiscal year 27 budget for fire overtime.

What have we spent so far in this fiscal year on fire department overtime?

The estimate for fiscal year 26 is 82.6 million.

Not obviously not all that has been spent yet, but that's our projection for the entire fiscal year.

Now, I don't mean to say that we think that fire is going to spend 9.1 million more than the 82 million on overtime.

What we're doing in the budget is proposing a budget for overtime that more closely reflects where we see the actuals coming.

Um so we've had a lot of conversation about the horseshoe of, well, wait a minute, you all you did was budget the exact same amount as you did last year for overtime this year, but you know that the actuals have come in higher.

Why are you continuing to budget budget that way?

So we put our thinking caps on and came up with a methodology that looks at prior year actuals over a five-year period, averaging those out, how that compares to the budget, how much budgetary savings we've had in other places to offset that to come to the figures that we proposed in the budget that we think is uh a reflection that reflects um the total amount of overtime to be closer to where we think the actuals will end at the end of the year.

So the administration is suggesting that by the end of FY27, um, we will have spent nine point one million on fire overtime, is that right?

No.

Um what the nine million dollar figure is is the fiscal year, and I see the the bullet doesn't have all the details, of course, um, but that the fiscal year 27 proposed budget has nine million dollars more in overtime than the FY26 adopted budget has.

For fire, the FY26 adopted budget for overtime was 43.5 million.

So this will bring the total FY27 proposed budget to about fifty-three million.

So we know it's not all the way up to the 82.6 million that they're spending this year, but again, um we anticipate that we could have savings in other areas to offset in addition to the fact we're gonna have the more cadets coming online where even the fiscal year 26 projection for overtime is lower than the 25 projection for overtime.

So we already know that we're making improvements.

Um overtime, right?

Um, but as we uh recruit and retain more um classified um, and this covers both fire and police.

Uh the idea is that as you have more um classified firefighters and police officers working on straight time because of minimum staffing, there's less of a need for overtime.

Okay, thank you.

Councilmember Pollard.

Thank you, Chair.

Back to water wastewater.

Stephen David mentioned earlier that we don't need any of that excess money for additional water wastewater infrastructure projects.

It's excess.

Based on the financial modeling that we've been working together with Samir and his team, as well as our outside financial advisors, looking at the capital improvement plan that we need to implement to complete the consent decree to do all the operational needs of the water and wastewater system.

We believe that the 5% right-of-way fee and uh offsetting the cost of the solid waste operations that's not covered by the administrative fee, that all those projects and all those operations can continue.

So when I was at the Eastwater, I think purification plan.

Okay, I was told that the new build out for that would cost about four billion dollars.

Correct.

That extra billion dollars that's sitting there or excess money, we couldn't use that towards this build out.

Where will we now be getting money for this $4 billion dollar build out?

So the East Plant, we you were there, you've seen it's a massive operation.

That project is going to take anywhere from, don't miss quote, well, I misquote myself, seven to seven to nine years, let's say, to fully replace that.

So as we've seen that the fund balance in the utility fund grow over time, and as revenues continue to come in, that fund balance is going to continue on into the future.

The financing of that plant, about $900 million of it is going to be through the Texas Water Development Board borrowing.

The cost of that borrowing, usually from the TWDB, the rate is around two percent interest.

Previously, in our modeling, before we knew we had the TWDB loan, you know, we were looking at somewhere if we issue our own debt, four percent, four and a half percent interest.

So there are savings there in terms of the ways that we're doing the financing for that project that frees up resources, but we have this additional excess money sitting there now that we wouldn't have to go back to get outside investment to cover that.

Couldn't we use some of this money towards this humongous bill for the the treatment plant?

I would say that it's I would say that it's not um it's not the idea of capital financing long-term assets is that you are not asking people today to pay the cost of an asset that someone 20 years from now is going to use.

I would say that it would be good to financially plan on using the money that you actually have today without having to leverage that for the future to pay for when you don't know what the future is, right?

So if we have money today, it's like having money in my own account today and say I don't want to use this, I'm gonna go put it on credit or or or debt.

Well, I'm gonna have to pay that off in the long run plus interest.

So I'm gonna be paying in the long run more when Stephen Davis says we don't have any additional use for this money is just sitting there as excess when we could put it towards a five-four billion dollar treatment plant that people have said is running or being held together by duct tape, right?

Thank you, thank you, Councilmember.

We got the point.

Um Councilmember Ramirez.

Okay, thank you, Madam Chair.

Just last topic here, Director, and thank you for going through all of this.

I know it's uh can't be easy.

Uh, but on police overtime, so um it looks like it's being increased 6.6 over the adopted uh 26 budget, which was 14.8, if if I have my numbers right.

Yes.

Which means that FY27, um it's proposed to spend 21.4 million on police overtime.

And in FY26, this this fiscal year, we're already past 30 million, as I understand it.

Is that right?

Um roughly, yes.

Um again, I want to, and that that's just one piece of the budgetary puzzle, although I know it's when we talk about a lot.

I want to bring you back to slide 46 that shows the very bottom line of our overall fund balance and budget for the city.

So even with these movements that you're talking about in fiscal year 26 as it relates to overtime spending.

When we look at the total budget, we really look at the bottom line what's left in fund balance.

And we see that from the time we adopted the budget to our current projection, we're only four million dollars variants.

So even with those, you know, overtime costs that are above the line item budget for overtime, we have savings in other areas, um, stronger beginning fund balance, more sales tax revenue, all these things that offset each other to come to the same bottom line that we adopted the budget at.

Okay, thank you for that.

And and um that that is a great point.

And you know, I asked about police overtime.

I hope no one accuses me of wanting to defund the police.

I just want to be clear, I do not want to defund the police.

We're not defunding the police.

I would like to see every city department run efficiently, and so as we go through these workshops, you know, I'm I'm hoping to hear uh what the fire department and the police department say about how they're gonna reduce overtime from this current uh fiscal year.

So thank you.

Thank you, Councilmember Davis, Madam Chair.

Just quickly the question um the the the consideration in regard to solid waste and also picking up trash from many private companies as additional that has been brought out.

Matter of fact, I was on a ride along, and one of the drivers was talking about the same thing, and he's worked in other cities, whether it's HEB or Walmart or whatever, which would be a revenue into the city, um with other competitive companies.

Is that something that the administration or uh them have taken thought about, you know, through through solid ways?

Um, you know, David, you can help me uh, we've absolutely contemplated that.

We've also contemplated something called managed competition.

So this is managed competition.

So this is where we would expect the solid waste department to compete against private uh solid waste franchises uh that work throughout the city of Houston.

Think of the big ones that you know, waste management republic, etc.

Um, what we want to focus on at least for right now is stabilizing the residential service that we provide.

We absolutely have that as potential plans moving forward that we would obviously discuss with this body.

That was one of my budget amendments from like 2020.

Yes, ma'am.

Would you say it was one of them?

Yeah, they manage competition with in a in a quadrant.

Well, what I can tell you about managed competition, Councilmember Davis, is that uh we've had two conversations, um, in an informal type of conversation with these vendors, the big ones, um, and I won't name them here, but uh in which we said what would it take for you to come and compete with solid waste?

And there were three things that they said that they would have to have, and two of them were difficult to swallow.

The first was they would want a 10 to 15 year contract, and the reason why they would want that is because they have to go in debt uh issue debt to purchase new solid waste trucks to serve Houstonians, and the useful life of trucks is about seven years, and so their debt wouldn't be able to go any longer than seven years.

So that's number one.

Number two is they told us they could take at about a maximum 50 to 60,000 residents.

Well, we serve 400,000 residents.

Right.

So we would have to cut up the city into eight to twelve different sectors and have eight to twelve different vendors doing trash service around the city.

And the third, and this became the most significant problem, was that they all wanted to name their customers.

They wanted to pick the neighborhoods that were favorable to them on road width, on lack of ditches, on different types of stuff.

And so those were the three requirements that when we first got into office two and a half years ago, and then about six months ago we had as a conversation with them.

And so managed competition is absolutely something that we're looking at.

It is a challenge to find someone who can carry 400,000 customers.

Yeah, good.

Well, I I think it's something that we we definitely need to consider around the issue.

And I I'm hoping that that could become a um an asset.

Yes, sir.

Yes, sir.

Thank you.

Thank you.

Councilmember Pollard.

All right, this is my last question because I know y'all are ready to go.

Um, as as it pertains to the the C US again.

With the consent decree, don't we use the CUS to pay off our obligations for the consent decree?

Yes.

So wouldn't we need that additional money to pay off those debts sooner?

So the consent decree projects, the majority of the ones that can be funded with um operations and maintenance, that work has been completed.

Those are the ones that address the sanitary sewer sanitary sewer overflows in the neighborhood, which was the basis for the consent decree.

What's remaining on the consent decree has to do with larger wastewater plant consolidation projects.

Those are projects that that are contemplated for in the CIP that you would not traditionally spend cash reserves on.

But you could.

But you could choose to not get a mortgage, but you could to eliminate not having to use leverage as much debt as needed with additional interest to pay for those same projects, correct?

So I'll end by saying that the administration feels that this is the best path forward for the 27 proposed budget.

That we could, if we didn't use these other items in these structural changes, some of the things that we would have to look at doing, for example, the number of general fund employees that we have.

If we had to find 200 million dollars of general fund savings just by cutting expenditures, that's the equivalent to about 2,000 employees.

When you remove police and fire from the general fund funded employees equation, there's only about 4,000 of them.

So we would have to get rid of half of the general fund employees to free up as much money as we have with these two structural changes.

Last question on page 53.

You have letters of support from all these entities.

Were they given this budget before we were?

Because I just got the budget yesterday.

So how are they able to send letters of support?

All of the council member offices were umited to briefing sessions.

I understand that what I'm asking about is not the briefing sessions, but the actual budget.

No, council member.

Uh the council what briefings uh the private sector company or excuse me the uh the advocacy groups that we briefed received the same briefing as council members.

We offered the briefing to council members first, as you know your office received that briefing from my staff and you didn't respond.

I'm not asking that.

All I'm asking is have did they see this budget before we did?

No.

Okay.

So their letters of support are based on briefings before they actually saw the budget?

Their letters of support are predicated on the two big fiscal actions that we're taking, which is the same briefing we gave council members.

That's my question is their letters of support are reflective of the briefings not actually seeing the actual budget.

Sure.

Thank you.

Yeah, Chris with Council Member Salinas' office.

Thank you, Madam Chair.

And thank you, Director, and for your entire team's work.

Uh my questions regarding the administration fee.

What fiscal year does the administration anticipate implementing a reduced or discounted rate for seniors, low-income residents who probably would not be able to afford the fee when it progressively reaches $300 a year by fiscal year 32?

And then kind of building on that, does the administration intend to develop uh like a discounted rate structure as the fee progressively increases?

So as it reaches this rate, the discount will be X amount.

Um that's something that's not contemplated for fiscal year 27 since the fees at $5.

We have looked at other um other cities and how they do some of those um reduced or discounted fees for um, for example, over 65 or um, you know, different different subsets of the customers.

Um it is something that we feel will need to be studied and will need to be discussed and ultimately become part of any change to the fee in future years by city council.

But it is something that um other cities do do and do consider.

Um that being said, when we looked at the other cities, even their reduced uh or discounted fee is still above the five dollar fee.

So it's something that um definitely um we plan to study in the future as you know, as the fees come forward in future years.

Okay, thank you.

But there's no specific year in which the administration's intending to be able to do that.

Not at this point.

It it wouldn't be in 27 or 20 year 28 since it's the five dollars at that point.

Okay.

Thank you.

Yes, thank you.

Thank you, Director.

Uh excellent work by the finance department.

I heard it was even later than four in the morning that you left this place.

So really appreciate all of your hard work.

Just uh most of my colleagues have covered a lot of what I wanted to ask about.

But did I hear you say that this year's five dollar amount and potentially next year's five dollar amount would just be passed through the bud the budget itself, but any increase would have to uh be accompanied by a fee study and a council ordinance vote.

Correct.

Okay.

But this year and next year it will just be part of the budget, or just this year.

That maybe is a question for legal.

I know that this year's establishing the fee in the five dollars will be as part of this year's budget.

Um possibly next year's as well, since it's the same dollar amount, but any increase to the fee would have to be um, you know, make sure it's still within the cost of that.

Do you want to weigh in, Eric?

Is that correct?

Yeah, I think what the um the fee study right now contemplates is this scheduled increase in the admin fees for 27 through, I think 32.

So what we are proposing, what we would propose is a budget ordinance that lays out that schedule in the ordinance, so it would just be proposed to be one vote.

Okay, got it.

On slide 32, what uh the the rev cap that that just contemplates the the city uh local imposed rev cap are there are changes to these numbers.

If you would um you know, if you would add in the state rev cap.

I know yours ours is usually lower, but does that yield any kind of difference in these numbers if we looked at both rev caps?

So if we if we had gone above the local cap and gone up to the state cap, the the foregone revenue would have been less than the 2.9 billion.

The state cap is it's only been a couple years that that's yes, yeah, and there's um it really started impacting us in 2021, and the state cap is a little bit all the calculations are different, but the state cap calculation sort of builds on itself.

It looks at your prior year's revenues and increases those.

So the lower your prior year revenues, the lower your caps going to be next year.

So it kind of keeps um but these numbers pretty much satisfy both caps.

Yes.

Okay, yes.

Okay, and the recycling special revenue fund, is that now in the C US?

I mean, what how's that?

So there are two special revenue funds um associated with the Solid Waste Department, the container lease special revenue fund and the recycling special revenue fund.

So um at the same time as the budget, um there are going to be ordinances that um seek to uh close out those two funds and transfer the remaining fund balance to the combined utility system because those operations, the the expenditure side is gonna go to the utility and the revenue side of those funds is going to go to the utility as well.

It won't be any kind of special fund within the utility, it'll just be it'll be part of the combined utility system fund.

Got it.

Okay, you're done.

We're gonna move to public speakers.

Colleagues, additional questions on anything on this presentation, please put into SharePoint and we will.

I mean, if it's a financial related debt related, RevCap related finance question, send it to finance.

If it's really digging into the and this is something I'm gonna really appreciate about this budget, we we spend so much time on the general fund, and we don't dig into the the CUS, but boy, we're digging into the C US this time around.

So um that you know, send send the questions to whatever department they're gonna get you answers.

I will start with public speakers, and again, thanks to the finance team.

Really appreciate your hard work.

Jack Valinski is first.

And I don't know how she pulled all those facts out there.

Um one of the things we can cut is a sixty thousand dollar podcast, um, going back to council member Pollard's question, it just doesn't make sense.

If we had all this money in the water fund, why didn't we use it for breaking pipes that are broken?

I know I sat and got calls for years about broken pipes that didn't get fixed in a long time, and many other issues.

It just doesn't make sense, and we had a consent degree that we had to take care of.

So if we had this extra money, there's been a problem.

We sat here last year, we were told that the budget was balanced.

It's not, it was not balanced this year.

We know that.

So we dug more into the reserve reserve.

Are we gonna do that again?

We're told about the overtime, only increasing a little bit.

Is that true?

We don't have a we don't have a history of that, but still, going back to the fact that we had all this money in the water fund, and it was just sitting there is really a problem.

Thank you.

Thank you, Jack.

Marion Wright.

We'll call her again.

Okay, she left.

Um Laura Galliard, virtual.

Laura, are you on?

Okay, Ruben Garza.

Hi, Ruben.

Come on up.

Thank you, Councilmember Alcorn, and thank you to the City of Houston.

And also, again, I echo what everyone's been saying here.

Huge shout out to the finance team for all the incredible work that they've done.

Um, you know, uh, as people may know, I'm with an organization called Strong Towns Houston, sub-subsidiary of the National for Nonprofit Strong Towns.

We look at uh city financial stability from a more holistic standpoint.

So while a year-to-year budget is definitely important to be talking about, we do understand that Houston is in a larger financial crunch.

Uh the Strong Towns Finance decoder, which I'm happy to share, shows that Houston's net financial position as of 24 is about negative 14 billion dollars, and I think only ticked up a little bit to about negative 13.

So we are facing some larger structural issues.

Um having said all that, I do applaud the um the finance team for coming up with something like the right-of-way fee.

It is an interesting way to take a look at the hidden costs uh of our current sprawled out infrastructure, but it does fall a little short in a few ways.

It's geographically blind in the sense that uh a dense block in midtown will basically have to pay the same rate as a larger, more cost-intensive suburban development.

Um, you know, Austin and San Antonio do charge these right-of-way fees, but something that Austin does that I think the city should consider.

If not this cycle, the next cycle is uh what's called the transportation utility fee.

Uh that is essentially treating the street network as a utility, it is charging monthly.

The city of Austin relies on the Institute of Traffic Engineers trip generation rates.

I think that's outdated because that's the same book of uh bad trip generation rates which spawn parking requirements.

Instead, we should consider something more like a right-of-way consumption, uh, you know, types of developments using street frontage, impervious covers, curb cuts.

These can all be calculated.

I have a little rough estimate here, but you know, single detached family homes would have to pay a little bit more than more dense uh multifamily uses tighter together.

And the basic theory is that the more sprawled-out infrastructure eats up more of more of or excuse me, more sprawled out development eats up more of city infrastructure and should be paying a fee as such back to the city.

Um, you know, some rough estimates from some numbers that I calculated show that it would actually have roughly about 200 million in uh yearly uh revenues as opposed to the 100 million proposed savings from the uh city's right-of-way.

Um, you know, the city already has this data through the drainage utility GIS.

Uh HCAD has the frontage, and we can cover uh we can discuss the impervious surface cover.

The gist is that um again, we're trying to encourage the more efficient style of development that does not eat up too much of our infrastructure and encourage more dense uh safer development that is more sustainable in the long run.

I'm happy to talk about a TUF a little more.

I understand there's some current legal headaches about Austin's only because uh there was a lawsuit about whether it's a tax or a street maintenance fee.

I think the way that uh a true right-of-way TUF transportation utility fund should be considered a street maintenance fee.

And yes, I'm a lawyer, but I'm not giving legal advice, blah, blah, blah, blah, blah.

Uh, I have to be very careful about that.

So, but I do think that uh something like a a right-of-way uh transportation utility fund should be considered by the city.

If not this year, then definitely next year.

Thank you.

Thank you very much, Ruben.

Appreciate your comments.

Next, Felix Kapoor.

Yeah, here.

Oh, good afternoon, Council.

Um, thank you, uh Melissa and the finance team for putting that together.

That must have been grueling to put together.

And now we have a whole document to share.

So thank you so much.

A few questions that I had, particularly if the finance team is available.

And if not, if someone on council could answer the question, the biggest them to answer them right now, but we'll get we'll get them down and we'll get you answers.

Okay.

Um biggest question I and I want to thank uh the counselors on here who are asking very specific and uh straightforward questions.

And I I don't know, I thought there weren't a lot of direct answers that were given.

So I wanted to acknowledge that as well uh as stuff like making sure fees over time don't then just get passed on to residents or ensuring and getting a direct answer on like, hey, this $5 fee isn't actually going towards paying salaries or improving safety equipment, which we've heard is a is something solid wasteworkers themselves have said they they've needed.

And I'm pretty sure they're not going to be really excited about seeing a five dollar fee not come to help support them directly uh to do their job or to uh feel supported by the city um in the current way it's constructed.

I don't know what page it's on in the um proposed budget, but there's like a table that says quality of life and the other the mayor's other priorities, and it shows that um quality of life is being reduced by 16%.

And so I had a question on, and it's the only piece that's that is being reduced.

It's not on this uh presentation, but it is on the mayor's proposed budget.

I'm trying to find the page that it's on, but I did have a direct question on like what comprises that number, because that's I don't know.

If you just want to look into that, I'll look at that chart.

Okay.

Um do you know which chart I'm referencing?

Well, we'll find it, but usually quality of life departments are like parks, library health, you know, those kind of departments.

Um but yeah, that that was pretty alarming to me.

Uh, and then um a few other questions just to confirm the property tax rate, like the max that was prop possible over Prop 1 versus what we had.

The difference is $20 million.

Is that correct?

Yes, like if we stay at the 51 51 cent, you know, we could go to raise a penny, and that would bring in 20 million.

Okay, and then uh one final thing on the CUS.

Like I think there deserves to be a very specific explanation, um, just like Councilmember Pollard was trying to really get uh that's very, very digestible for residents, um, as we are the ones imposing this fee because right now this fee is just going towards uh cushioning a deficit uh that was largely created by this administration and by everyone on this council by voting to give 820 million dollars uh to police with money we know we didn't have.

Um so I I'm very curious to know like what the plan is to educate the masses about this CUS, because that's something I've got to do.

And uh right now there's not a lot of direct answers or some good information that's digestible for residents um that you know don't have the space and time to be here at City Hall because they're working or taking care of their kids.

And then one last thing, uh, and thank you for that extra time.

Extremely concerned about this money being dipped into further as the city is now continuing its trend of pulling restricted fund dollars to pay for other services.

So you know, see the ad valorem tax.

So very concerned about that five percent that it's taking away, actually being increased over time, either with this and definitely with this administration, if not with future ones, as well as um wanting wanting to know like we heard Randy yesterday talk about the fund will be replenished.

What is that replenishment rate that it's getting on?

Like I think someone said it might be gaining interest, like if you're taking five percent, is it being replenished by 10?

And then kind of all good questions, and all will be covered um at the budget workshop with public works.

Okay, and that's a Monday the 18th at 2 30.

Okay.

Uh so and you know, that's that's all part of the education is to the the workshops, the the you'll you will be able to ask every which question.

Uh uh please let me know ones you want us to ask and and we'll we'll get we'll get that going we have a we have actually a thing on our website if there are specific questions you want to know and we'll submit those ahead of time you know we'll hopefully get questions out to people in writing um you know there's a lot to learn in this budget like I said we spend a lot of time on the in the general fund but not as much in the combined utility system so we'll really be digging into that that's all those are all good questions and and we'll be digging into that and we also have the our two budget town halls that we'll be doing to educate the public and all of that.

Okay and those questions should I submit them through the form that you sent me Jordan okay uh thank you great okay Dominic Mazok in the room I uh ate lunch here I mean I walked a couple blocks over so anyway get uh couple of things about this budget that I am uh I'm a little bit concerned about number one and I brought this up before Metro starts its budget processes for October the first four or five six months in advance and their budget is nowhere near the C Houston's budget if y'all gonna start on July the first I think the budget processes should start February the first so that you have more time to really now Mr.

Pollard I love the way you drill that that was excellent that I love that so we're all of us a horseshoe as a citizens can can drill so two they were talking about uh contracting out city services I think for areas like Kingwood that's up in Montgomery County north of Umble is kind of like an island of its own and I think Willowbrook mall is another place maybe that's something we actually need to look at is contract out those services to the to the local people first responders there provided they have the same level of service as in the main part of the city and then we bring all that equipment back into the city into the city proper I think that needs to be done and two I know we're doing the GRB but I have some moral problems with that um number one the Sofi Stadium complex in Los Angeles is privately owned.

It's owned the primary stockholder for that is the owner of the LA ramps I think there is money to be made in the hospitality business but I do not think a city should be in the process of being uh in a business I think we need to help businesses but we should not be helped in a business and two that with the Turks and some bad districts they have their own budget but if they ever go under you know the backstop is horseshoe and I think that needs to be really really looked at what happens if one or one of these groups fails that is something that needs to be looked at another thing is budget is not looking at is what happens if there's a shortfall from the World Cup games here.

Uh you know there you know normally we have a convention or something normally the city or uh Houston first is guaranteed so much income it looks like now with FIFA it's not going to pay us the fair amount of money it's going to cost the city metro terrace county to operate these games and I think that needs to be looked at further when we when we put out a bid for a for an event that we get our fair money back.

Thank you Dominic very good to hear from you the bell has has rung but thanks.

We always value your input.

I appreciate your being here.

Okay, thank you.

Well, you'll hear for me more.

I know you'll be back.

Okay, guys, before we adjourn, let me just remind you budget workshops begin May 12th with finance, Fleet, and GSD.

Uh, again, uh, please use SharePoint for written questions.

Um, finance team, my hat is off to you.

The incredible job.

Um, Melissa sitting up here for two and a half hours being grilled.

It's hard.

Um, so big hand of a big round of applause for and if there are no other comments, this meeting is adjourned.

Thank you.