Can everybody is the mic working?

Okay, great.

All right.

So I'm Cheryl O'Brien.

Letitia is in route.

So I am formally opening the meeting tonight.

And this meeting was specifically requested to be in person by the city.

So I want to remind everyone the sign-in sheets are on the table over there.

It's very important that if you're here as a representative from your super neighborhood council, please sign in.

Put your super neighborhood number in there so that it helps us keep track for our attendance records that who's here.

So with no further ado, I'm going to immediately turn the meeting right on over to Stephen David.

He's with the city.

And Steven, come on up and have at it.

The meeting is yours.

Good evening, everybody.

So what I decided, what I wanted to come here, and I council member Alcorn uh to work with y'all on is we've recently uh recently released the budget, as y'all know.

Um we've started our budget presentations, which tomorrow at 9 a.m.

is the first one that council member Alcorn will host.

Uh I imagine some of y'all are gonna be there.

But what I wanted to be able to do was come to this organization, which is going to be representative of obviously all of the communities that y'all represent, and walk you through the same budget presentation that we've given all of the council members uh here to be able to answer any questions that you might have about it.

Uh, there's a couple of different ways that I'd like to maybe approach this, and maybe we could use a little bit of a democratic thing, and see if you want me to go through a fast presentation and leave more time for answering questions, or if you want me to give the same detailed presentation that we gave council members, and then we can uh do a shorter QA.

What is y'all's preference?

Show of hands for uh a detailed presentation.

Detailed presentation, show of hands.

Perfect.

All right, that's music to my ears.

So uh what I want to walk you through at a high level is remind y'all what the city of Houston is and what it is not.

Uh so at a high level, we are three funds.

We have the general fund, which is about twelve thousand five hundred employees.

Uh it is a three billion dollar budget, and that encompasses police, fire libraries, parks, health, and uh what we would call our corporate functions.

These are IT general services, the things that are internal support functions.

We have our enterprise fund for airports, it's about 1400 employees, 740 million dollar budget.

That is exclusively the three airports that we have, Bush Hobby, and Ellington.

And then we have the Enterprise Fund for Public Works.

That is comprised of six different funds.

Uh, so this isn't just one fund.

We've got water and sewer, we have streets and drainage, we have our uh permitting fund, also known as the building inspection fund.

That's about 4,400 employees, also a three and a half billion dollar budget.

City of Houston has a very interesting and unique perspective or situation in the state of Texas.

So every jurisdiction in the state of Texas sits underneath what we call SB2, which is also known as the state's revenue cap.

And the state's revenue cap is three and a half percent growth.

You are capped at three and a half percent growth from last year's revenue.

Pretty simple equation.

There's some nuances to it uh that make it a little more complicated.

But then the city of Houston also has its own revenue cap.

So we're the only city with two caps on our revenue.

City of Houston's one is more restrictive, so uh at a very high level uh in 2004, the revenue cap was passed.

It was amended in 2006, and what it says, and this is probably the most detail I'm gonna get into because this is an important one for y'all.

We have a calculation.

So we are allowed to grow our revenue, the lesser of four and a half percent growth, which is higher than the states, but four and a half percent growth, or inflation plus population growth as a percentage.

And what that means is that if inflation was two percent and population growth was three and a half, that would be five and a half percent.

We could only go to four and a half, but if inflation is two percent and population's only one percent, we can only go up to three.

And so the challenge with this formula is around population growth, and this is an important one that I think y'all feel specifically.

So, population growth can only be uh verified by the Census Bureau, federal government.

Uh, and what they do is they do population growth on a two-year lagging indicator.

So, what that means is that we are going to set this year's tax rate 2026 on 2024's population growth.

So, what that means is everybody that moved into your communities in 25, and everybody that moved into your communities in 26 cannot be accounted for in revenue.

So, we're serving them.

We're giving, you know, police calls, 911 calls, new solid waste customers, new water and sewer customers.

We cannot collect ad velorum taxation on them because we are capped.

And so that is where it becomes the most restrictive property tax cap across the state of Texas for any jurisdiction.

And so that's where the city of Houston gets disadvantaged a little bit.

The outcome of this and what you're seeing, and it's a little bit small here, but what you see a little bit, the uh the tax rate has consistently, because of our local tax cap has consistently decreased, which is netted about a benefit every year to the average property, uh the average house excuse me, value of home is about $340,000.

Uh, and that has equated to about a $400 a year savings to the homeowner.

Um, but what it has caused is each cap, each year our tax rate has to decrease.

So when I first started at the city of Houston back in 2011, tax rate was 63 cents, now it is 51.

And so what that means is for when we hit our revenue cap, that's a great thing to hit the revenue cap because it means that we're growing in a really awesome way.

When we don't hit the revenue cap is the problem because that means that we're not growing at the expected thing.

And so now we have to have a conversation around do we increase the tax rate?

Do we have uh do we just accept less revenue?

So it creates this uh negative incentive on the way that the city of Houston functions.

Last thing that I'm gonna show you before I dive into the very high level, and then I'll cut myself off.

I'm gonna talk to you about what we're doing, what we're not doing, and then show you what the general fund impact will be.

But I want to show you this slide because this is also important.

We don't always like to compare ourselves to other cities because we know we're the best, but uh it is important to give ourselves context around what other cities are facing with regard to um the way in which money flows into their general fund.

The city of Houston, the way that I would frame it, I'm a finance person by uh by education and profession, so we would call this a lack of revenue diversity.

More importantly, we don't have a sustainability or resilience feature built into our general fund.

So the city of Houston's general fund, about 80% of it comes from uh property taxes and sales tax.

Everything else is uh just it falls off and it's all these sort of little nitpicky fees that y'all deal with that go into our general fund.

Um, other cities across the state have very diversified revenue streams, and that's what this budget year is going to attempt to rectify and align ourselves with other cities.

But for example, San Antonio, the the blue bar is representative of the tax rate itself, the green bar is representative of a garbage fee, yellow is representative of a water utility transfer, and orange is representative of an electricity or a natural gas utility transfer.

So when you look at places like San Antonio, Dallas, Austin, Fort Worth, El Paso, they have diversified revenue sources.

So that means if the economy all of a sudden we find ourselves in an unplanned war and oil goes up to be very expensive, and we start to see consumer uh indicators showing that we're dropping off on prices because gas is too expensive.

There's resiliency in other funding streams that come in, and as sales tax begins to dip.

City of Houston doesn't have that resiliency.

If we see a housing bubble burst like we saw in 2009, 2008, 2009, or if we see another great recession and the housing market bottoms out, then we don't have that resiliency.

50% of our general fund revenue is tied up with uh ad valorum taxation.

So the city of Houston, by if you take a look, generally the only revenue stream that comes in besides sales tax is ad valorum.

And so what we see here is a over reliance on two very what can be very fickle revenue streams, sales tax and property tax.

So we have a lack of revenue diversity, which is a big challenge and a big disadvantageous thing for the city.

So uh I'm not gonna talk about this is just for what it's worth.

This is the uh this is how we post up points on the scoreboard.

This is our governing milestones.

Basically, at a very high level, city of Houston, when we came in, we took year one as a year of learning.

I this was going through this exercise and looking at what we did was a whole list of a whole bunch of Houstonians' traumas and reading about what happened.

So when we came in, there was uh first week was college football playoffs, which is a good thing, had a whole bunch of new people inside the city.

Um, but then we had a freeze that lasted, I think four days, and we hit got down as low as 14 degrees.

Then we had the 264,000 uninvestigated police incident reports, then we had the high water bill crisis, then we had Kingwood floods, then we had the Derecho, then we had Hurricane Barrel, and that was the first seven months of the administration, right?

So it was a very hectic time.

But year one would best be described as a year of learning.

We took the time to hire an outside consulting firm.

They came in and gave us a fresh set of eyes of about what the city of Houston's good at, what we're bad at, where our strengths are, where our weaknesses are, and more importantly, helping us develop a roadmap for prioritization of what we want to execute on.

And then year two was that year of implementation and execution.

We did things like an act of hiring freeze.

We had an over reliance on um, well, our workforce, about 32% of our workforce was eligible for retirement.

So we opened up, which is very, very high.

Industry standard is usually eight to ten percent.

So about one in every three employees could have on a bad day just signed up and walked, and we could have done nothing about it at all.

And so what we were allowed, what we did was we opened up voluntary retirement, and we said you're not gonna get punished if you don't take it, but if you do take it, we're gonna give you three months' incentive, and we are going to pay for your active employee benefit rates for the next five years instead of you going to retiree benefit rates.

About a thousand fifty-six employees took it, that reduced our liability by about 11%.

It gave a planned dignified exit for folks that were ready to take it already, and what it gave us was an opportunity to reduce cost.

1,056 people equaled about a hundred million dollars a year in salary, and that allowed us to rethink the way that the organization executes and allowed us to reshape our organization in a way that made more business sense.

Um that so that was examples like that were year two, and we're now at year three where we're talking about fiscal year 27, and effectively the operating premise is that we can't continue to do business the same way.

So I'm gonna skip that one.

So, what we're not doing this fiscal year, we are not going to be raising advalorm taxes, so property tax increase is not on the board.

We are planning for another 51 cent tax rate.

We are not uh expanding government programs.

This is probably the most painful of the things that we're doing.

We have a whole lot of in the wings things that we would like to launch.

For example, we've been working uh with the mayor on a new sidewalk program.

There are 2800, excuse me, 2300 road miles across the city of Houston, largely the burden of uh low to moderate income communities that do not have sidewalks, and we want to go and build sidewalks, but you have to be able to allocate money to do that, and we think we need to prioritize budget stability over the net new programming.

So we're not expanding government programs.

This would be considered a maintenance budget if I was gonna have a conversation with y'all about this, like I am.

We are not retired relying on one-time transfers.

So a lot of mayors, I was a part of this, Sally, you and I were part of administrations that did this, where they close budget gaps by doing things like land sales.

Um, it's a it was a good quick way to solve a budget gap, especially when the budget gap is small.

Um, but it doesn't affect the overall systemic challenge.

The city of Houston has always had a structurally imbalanced budget.

Um, each mayor, I think, has had a really wonderful set of wins underneath them.

If you go back to Mayor Parker, uh, if you go back to Mayor White, he was able to fend off a whole, bring a whole bunch of sort of corporate excellence.

He came from the corporate side and he brought a whole bunch of sort of business acumen into the seat.

Mayor Parker came in and she did rebuild Houston, which put the establish the lockbox.

Um, you talked to Mayor Turner, go to Mayor Turner, and he was able to do one weather us through a hurricane, uh, the biggest hurricane, but also do pension reform, which gave allowed freed up billions of dollars of unfunded liability within our pension system.

And but now we're at the point uh where we have such a significant uh budget deficit that we need to be able to do systemic change, and we need to be able to have that sort of fiscal reform.

And more importantly, and this is gonna be a thing that I think all of y'all are gonna have questions about, and I'm happy to give a detailed answer as to why, but we are not deferring infrastructure obligations.

We are not gonna be uh going slowing down on any of our consent decree work.

Uh, in fact, Randy is working on a presentation that he'll be giving to City Council very soon about that, um, how we are either on time or ahead of time in every aspect of our consent decree.

Uh, we are not going to be deferring CIP, we are not delaying any projects whatsoever, and this is gonna be an important thing.

So, what are we doing?

I'm gonna break this out at a very high level, then I'm gonna jump to the slide, and then it's question time.

Uh, jump to the budget slide.

So, at a high level, we are doing two simple concepts that we're gonna are gonna require a lot of answers, I'm sure.

But concept number one is one A and one B.

We are declaring solid waste as a public utility under Chapter 1502 of the local government code.

We are allowed to declare a number of things that cities do as a utility.

Uh, for example, water is a utility, sewer is a utility, electricity, natural gas, solid waste.

These are all things that this particular state law envisions as being declared a utility.

We have not done solid waste, other cities have.

We are declaring it solid waste is a utility.

Now, what that does from a practical perspective is it picks it up out of general fund and puts it inside the utility fund.

That's it.

The second thing that we are doing is we are establishing a five-dollar administrative fee.

And I'll, I'm happy to explain why we're using the terminology of administrative fee.

I know that there's some folks that are upset about it, but there is a logic behind it, I promise you.

It's not just made up wording.

Um, but we are doing a $5 administrative fee, and the high level of that is that we're gonna keep it at $5 for two years, and there's two reasons for that.

One, we fully recognize that this is the first time that the city of Houston is going to have a fee related to solid waste.

The cost of doing solid waste in the city of Houston is $25 per household per month.

That is a thing that we've studied.

We have released the study, it's online, you can go to find it.

It's called the Burns and McDonald's study.

And what they say is that it can be anywhere.

If you want to do all these extra added benefits, it can go really high, but to do core function within the within the solid waste department, it is $25 per household per month.

Mayor Whitmire does not believe that we can go from zero to twenty-five.

More importantly, and that households can tolerate that kind of increase.

More importantly, we are in full reform mode within the department itself.

So when Larius came in, there's a whole bunch of things that all of y'all are acutely aware of.

But for example, uh we were on paper routing.

We didn't have GPS devices in our vehicles.

There weren't performance metrics, there wasn't routing.

We didn't use Google maps in our trucks.

And that's not a that's not casting aspersions on the drivers themselves, right?

There's on top of that, we had significant amounts of neglect with our fleet.

Um, you know, a useful life of a solid waste vehicle is seven years and about 200, 250,000 miles.

Average age is nine or ten years now, and it's like 350 to 400,000 is the average for our vehicles.

We have old vehicles, and then maybe stated a different way.

If we compare ourselves to cities that are as big as us like LA and Phoenix, on average, their solid waste departments are dealing with five to ten breakdowns per day.

We're dealing with 40 to 45 breakdowns per day, which is about our quarter of our fleet in the field.

Um, and then on top of that, we have neglected facilities.

So all of those things have culminated into a solid waste department as you know it.

But when Larius came in, the first thing that he took under his under his arm was I've got to modernize everything.

So we now have GPS devices in all of our solid waste vehicles, but more importantly, we have GPS devices in all of our supervisors' vehicles.

One of the things that we have come to find is that uh our supervisors, a lot of our supervisors get on 610, go around the loop a few times and then go back to it and don't step a foot into a neighborhood.

So they're not able to keep performance metrics on the drivers themselves.

But we also have those devices inside the trucks, and then more importantly, last year uh I know that we made big hay about it, but I don't know if it got to y'all.

We made the single largest municipal purchase of solid waste vehicles that the city of Houston's ever purchased.

It was 50.

And that replaced about a quarter of our fleet.

We didn't get rid of any of our vehicles, we just moved those new ones to the front and moved the uh the old ones as backups to the new ones.

But more importantly, 38 of those trucks became dedicated to recycling, which was the big pain point that we had.

Garbage started to get back on time.

Of course, there are times when we miss it, and that's why we're modernizing our technology so we can catch when our drivers are missing it.

But more importantly, so we can validate that the person who's calling and saying you missed my trash actually had their trash missed, and they weren't like, oh dang, I need to just go put it out real quick, I forgot to.

And then the the last thing that we uh so we're working through this modernization, and so the perspective that Mayor Whitmire had was one, I don't want to create household shock for going from zero to twenty-five bucks, but also five dollars is the validated amount that it costs to administer the department itself, five dollars per household per month, and that is a reasonable cost as we rebuild the department to get it more on time.

More importantly, what that five dollars represents is about twenty-four million dollars of revenue, and now we can issue what's called a revenue bond, which means it is a dedicated funding stream for things like new garbage trucks and improved facilities, transfer stations.

So I'm sure you're gonna have a ton of questions about that, and I can answer those two.

So that's one A, one B.

It's got a little bit longer than I cared to get, so I apologize.

I'll go real fast now.

Uh right-of-way rental fee.

This is also called a franchise fee.

Um, this is a standard thing across the state of Texas and honestly across the United States.

We do it locally right now.

So, for example, Center Point Natural Gas, Center Point Electricity, all those telephone poles that sit in the sidewalks, Center Point actually has to pay the city of Houston's general fund to the tune of about a hundred million dollars a year to occupy the right-of-way.

Right-of-way is considered mid sidewalk to mid-sidewalk, conveniently, we just call it curb to curb.

But that is considered the people's right-of-way.

This is the concept that when you incorporate as a city, there's certain things that won't be taxed because it's a core functioning of the city.

So, what that means is that the general fund of the city of Houston is considered the people's fund.

This is where everything sits, it's where we put almost everything, except when we decide to spend things off as a fee for service or what others would consider an enclosed business.

So, general fund, Center Point pays the general fund to occupy the right-of-way.

Uh, we also have ATT, Comcast, other utilities, telecom utilities that pay right-of-way fees as well.

And then on top of that, we charge private businesses that utilize our right-of-way for their private business gain.

So for profit purpose.

So, for example, if you are a solid waste hauler, a waste management, a BFI, a republic, you and you are hauling away trash and you're using city streets to get to that business, you are paying us to do that.

We do that all the time.

It's something that we actually it's one of the most fun games that we have at City Hall.

This is a little bit of a deep cut of a nerd thing.

It is more fun than you would expect to read the names of the companies that these folks decide to name themselves.

My personal favorite is a guy decided to open a business and a trash business, calls it duty calls.

So you know.

So that is a normal thing that we see.

However, the city of Houston has never held itself to the same standard that we hold other things like Center Point utility and telecom utility, and the water and sewer system does not pay a right-of-way fee into the general fund for occupying it.

It is a utility, no different.

It is an enclosed business.

Not technically, it is separate from the general fund.

But and there are memos that we've seen going back as far as 25 years saying we should be doing this because if you go and look, you've got Austin, Austin Energy, Austin Water, Dallas Water, Fort Worth, El Paso, San Antonio, everybody makes their utility compensate the general fund for the purposes of occupying that right-of-way, and the city of Houston's just never done it.

So that is what we are going to be doing.

What that does not mean is it does not mean water rates go up.

And I can give a very technical answer for y'all.

I'll wait for the QA on this.

But there's a very technical reason as to why this won't impact water and sewer rates and why it won't delay projects.

And I have a slide for it too, so I might be utilizing that.

So the thing that I'm gonna end on is showing you what this does to the general fund outlook.

As you all know, this is our structural balance, structurally balanced budget, unstructurally balanced budget.

And what we see here is the red line that you can see is what our do nothing budget gap is.

If we do nothing this fiscal year, we are going to have a $209 million budget gap for FY27, a $334 million budget gap for FY28, $381 for 29, and 446 for FY30.

So when you hear council members ask the question by FY30, do we really have a half a billion dollar budget gap?

The answer is yes.

That is the projected budget gap if we do nothing, which is why it's important that we have to do something this year.

Um more importantly, and this is gonna be the conversation that is I can't stress this enough, FY28, if we do nothing is when we go negative cash balance.

So what that means is someone in my position has to think about ways in which we stop doing city services.

Um, so where we can cut out, we have to, I mean, effectively that's layoff territory.

And one of the things there are two things that Mayor Whitmeyer came in and said, I don't want these are the two things that we cannot touch until the city of Houston has done everything in its power to uh make sure that we can get to a structurally balanced budget.

The first is I'm not going to increase property taxes, and the second is I'm not going to lay off city employees to close our budget gap.

And so this is what that represents if we do nothing.

Now, what these two actions do is they uh effectively give us two and a half years of stability before we have to go do the next thing.

So the way that we've been framing it is if fiscal stability is uh building like building a home, this fiscal year is laying the foundation.

Um this isn't going to solve the problem.

You're not gonna see like a victory, uh a victory lap or a mission accomplished banner flying behind us, but this is the first two important steps that we have to take to be able to create that foundation of stability so we can build on it moving forward.

And what this does, so where we were talking about a 209 million dollar budget gap for FY27, we're now seeing a 25 million dollar budget gap.

We're seeing 334 for FY28, it's gonna be reduced to about 92 million.

And so we've put these budget gaps back into sustainable territory where we can begin to have I can close a hundred million dollar budget gap.

We've uh we reduced a hundred million dollars of salary cost with the voluntary retirement.

There are still about 2,000 eligible, 2,000 uh employees that are eligible for retirement, which represents about 19%.

The the say the normal ratio is between 8 to 10%.

We can still work through that that category.

We've also we were able to cut $122 million dollars just through through doing like no-brainer duh stuff.

And I know, um, so for example, if you needed anything in the city of Houston that was not an on-emergency, you call 311, right?

You want information about when you're where your warrant's at, if you have a warrant, when your court date is, how to get to the courthouse to open a service request, all the things that y'all know how to do.

But you didn't call 311 if you had a water bill issue, right?

You call water bill calling center.

So we merged those calling centers because it made no sense.

There were not enough 311 call takers, and there were way too many water billing customer service representatives for the amount of work that they were doing, and so we merged and we cross-trained everybody, and now you just call three on one, and that's it.

And so there's a lot of smart things that we were able to do that we can continue to do those things, but you can't when we're staring when we're like a year and a half away from going off this sort of fiscal cliff.

And so, what this represents again is the first step towards a stable budget moving forward.

We in effect the so give you raw numbers here by declaring solid waste a utility.

We move it out of the general fund, put it into the the utility fund balance, utility fund, and that's gonna free up about a hundred and seventeen million dollars of overhead within the general fund.

The uh right of way the uh five percent of uh gross revenues combined utility system right-of-way fee will bring a hundred and four million dollar new revenue into the general fund.

So it'll have an offset of about two hundred and twenty million dollars, and that is gonna be a go forward number.

This isn't a one-time thing, this is going to be a sustainability thing moving forward.

Um, having said that, I just talked a really fast and actual uh so I'll pause and answer any questions that you might have.

My understanding is that we've got to go to the microphone for the question for the benefit of everybody in the back.

And before we start asking questions, good afternoon, everyone.

Good evening.

Hey, my name is Latissa Grant.

I am the chair of the secret neighborhood alliance.

I will first call thank everybody for me.

We can just a couple of things when we go to ask questions at the mic.

First of all, we have to ask questions at the mic, that's number one.

But in addition to that, if we can reserve the questions first, comment second.

So if you have a comment, if you can hold your comment until all the questions have been asked and answered, that would be amazing.

So thank y'all so much for being here, and I will turn it on over.

Thanks so much, one minute for each question.

Okay, can you go back to the first slide where you were showing the different cities and the where the money comes in and how we didn't have but that one color?

Yes, ma'am.

Yeah, go back to that.

One, two, don't count this as my time.

Okay.

Now you have one color there, but we do get money from as you said, Comcast and the different utilities.

That's right.

That's franchise.

But why that isn't showing up on there as another color?

Because it's a tiny spec.

And more important, more importantly, uh, the utility, this is considered the uh natural gas, uh, natural gas or electricity, and that's a fair point.

But the uh the water and sewer utility are the ones that I referenced.

I misspoke when I was doing it.

So water is water, utility is sewer.

Correct, but I'm just saying in the I know that in the girls fund, you get the Comcast AT.

That's all a part of our uh general fund uh balance.

And so I was wondering why that wasn't in there because I know the cities have that.

I agree that you should be moving this stuff to the other fund because you got more money in there, you got our billions of dollars, and I know that'll make it look better, but it would help a lot if you always sunset some of the TURS in the very wealthy neighborhoods where they don't need to be because it's supposed to be for low-income neighborhoods, but they're not, they're for profiting, making a bunch of money, and that needs to be sunset.

That will help you all a lot in reducing your fund.

Thank you.

Thanks, Tamara.

Hey, Jack.

Okay, I have two questions quickly.

Number one is can we get a chart of every department being funded or and or being defunded?

So we know what the budget looks like.

Number two, yeah.

How can you tell me that taking out 200 million dollars a year out of the water fund is not gonna affect the water fund and fixing things and doing with the consent decree, etc.

etc.

200 million dollars.

If we had that money lying there, then why didn't we get a rate decrease?

It's a good question.

I'll answer it a couple of different ways.

The first one is the budget's already uploaded, so you've got you can get the full documents that you have, and it I think it's like the first tab in is a general fund outlook, and you can see all the departments.

So you can go right there and see what the FY27 budget is and what the FY26 adopted budget was.

Um, so that you can do that comparison right now.

It's available online.

Um, and I've also got my handy-dandy budget book in the back, Jack, if so, you want to grab it, you can just have it.

Uh the I'll answer the second question in a couple of different ways.

I'm gonna talk to you about it from a fiscal perspective, but I'm also gonna talk to you about it from our operational perspective.

So the answer, the the lawful legal answer about water rates is that we can't decrease water rates when we're under um when we do a fee study and a rate study and all of those things, but more importantly, our water rates are also tied to a consent decree.

It's just a little bit different, right?

So, but uh what you've got to think about, and um, I don't mean this in a negative way, but the thing that you've got to put your frame of mind in is that we set water rates uh in a snapshot in time, and what that snapshot in time necessarily looks at is what is the cost of running the function itself.

The solid waste is a great example.

The $25 per household per month is an anal is a really sound fiscal analysis of what it costs to run solid waste, but the necessary assumption is that solid waste is being run efficiently, which I don't think anybody says that.

So when we talk about as we build in efficiency, that $25 most likely will go down in cost.

Well, when we are setting rates, you have to assume at the time that the functioning of the department is being done efficiently, or at least it's just that this is the cost.

Since then, there have been a whole bunch of changes that have been made.

And I'm gonna show you a slide.

I've got a slide for this, uh, and it's I think it's an important one.

It's probably one of the most impactful slides of this presentation, if I do say so myself, says the guy who made this presentation.

Sorry, guys.

Okay, here we go.

Actually, I'm gonna show you two slides because I think this is gonna address other questions as well.

Our combined utility system, we have to look at two different things.

We have to look at what's called debt debt service coverage ratio, so this is effectively keeping enough money to pay your debts, and then we also have to look at what's called operating cash reserves.

So on a debt service coverage ratio, we negotiate with our bondholders through an ordinance called the Master Mod ordinance, and we they basically say what makes them comfortable with the rates that they're giving when they purchase our debt for being able to what we have to carry to make them comfortable so they'll continue to purchase debt from us.

Uh that rate as set by the agreements is between 120% and 135%.

So what that means is for every one hundred dollars of debt, we need to carry at a maximum 135 bucks.

We currently carry 215%.

And there's a reason for it, and I'll walk you through it.

But the second one that I want to be able to talk through is what's called required cash reserves.

So this is not related to debt, this is related to operations.

This is about how we do our business every day, running the water and sewer system.

We have to carry by ordinance 60 days of cash reserve, meaning if all funding stopped, pop, there was a line, no Houstonian paid ever again.

By ordinance, we have to keep it running for six, we have to have enough cash to keep it running for 60 days.

Cash policy, as we're further refined by public works because 60 days is kind of ridiculous.

I don't know why they didn't change the ordinance, they just refined it further by policy, is 300 days.

Currently, uh public works carries 550 days cash balance operating, so it means we have 250 more days.

Now, some would say that's fine, good, whatever, let's keep it in there.

But the conversation that we're trying to have with this budget cycle is that we are saying we're carrying 550 days.

There's a reason for it that I'm gonna walk you through in a second, but more importantly, we are talking about fiscal cliffs in our general fund.

So we're talking about closing libraries and closing parks and stopping to do all the things.

So we have to have a rational conversation about what is the value of the money if we know that we can commit to continuing to do all of the work that we're expected to do in our water and sewer fund, and is it worth closing down all of the libraries and all of the parks and all of the things that go with it?

So I'm gonna get off mic and walk you through this because there's very important operational context that I want you all to have.

So if you notice between 2016, can you all hear me in the back?

Technology, man.

Thank you, Doug.

So if you go from 2016 to 2021, you see general flatness within our cash reserves.

It means on an operational perspective, we are taking in about as much money as we are spending.

And that means that we kept anywhere between 700 to about 810 million dollars in my caution calling this fund balance.

Fund balance is a little bit different here.

Our fund balance and the general fund is considered savings, like any like any of y'all's savings account.

This is considered um like a set of programming and out years.

It means that we've got about 800 million dollars of planned projects, just for y'all's edification that represents about 15, 20 years of projects.

And what the city of Houston historically has done is said we want to go ahead and fully appropriate the project.

So that means other than short of the very, very big, big debt stuff that we put forward, we were planning for 15 years of work via cash payments, and we were appropriating and socking it away, which is from a finance perspective a very unsound use of liquidity.

But there was a I would say a little bit of like a cautious approach.

Mayor Turner, with Carol Haddock as director and Randy Mackey as uh the chief operating officer, they did a really interesting and clever thing starting in 21.

Between 21 and 22, you'll see this this super peak.

What they did was they said we're going to drive huge amounts of efficiency into the department.

They got a new work order system, they started doing automated routing, they established new performance metrics because it's right around the time that they started doing outcome-based budgeting.

And so to get your tie your budget to performance metrics is the necessity that we have.

And so we began to see employees doing more work with less money.

And we started to go after if y'all y'all have all heard the the eye-popping stat that we leak 38 billion gallons of water, which is the same amount that Fort Worth consumes each year.

That is when they started doing the 3% replacement program, and they targeted the worst pipes.

So they said we're going after the worst ones first.

And we began to see an increase in the cash balance.

Not because we were doing less work, we were doing more work, we were doing it more efficiently.

And so that was from 20 to 21.

And then you see it sort of level off, and then when we came into office, we went from uh roughly like uh the 1.2 to what about 1.3 billion, in which that's leveled off.

And what that represents is a couple of different things.

So one, it's I'll say this, and you know, you can roll your eyes if you want, but it's kind of the Whitmire effect on the state of Texas, and then more importantly, we decided to go and dive in for more diversification of project funding sources.

So the state of Texas basically said, I mean, because the state of Texas is the state of Texas, they said, we love Whitmire, we uh we want you to do business, we've got more trust in the city now.

Um we've got trust in Whitmire because of the 52 years of public service, but really what that came out to was less about the public dialogue and more about we're going to offer you uh loans, and then they did this in the legislative session as well.

We're going to offer you opportunities for funding sources that you didn't necessarily that any not all cities had before.

So, for example, we've always been able to take out uh Texas Water Development Board loans anywhere between like two to three percent uh interest rates, which is way more favorable than we can issue those debts on.

Ours is gonna be anywhere between four to six, but more importantly, we started getting opportunities for 0% interest, so we could take debt out at 0% interest, and so additionally, the federal government opened up what's called WIFIA, so this is the water water infrastructure funding act, uh, but with IA loans, and these are federal loans similar to the Texas Water Development Board ones for specifically for water and sewer, and we began taking those loans out.

And so we saw this headroom create, and what that meant was that instead of carrying what we were seeing about average of 800, we were carrying about 1.3, 1.4 billion dollars of fund balance.

And so we said this was the head space that we needed.

I like this one better.

I sound way better on this one.

Uh, this was the head space that we needed um to be able to go and create that revenue diversity that we're creating for ourselves with the 5% transfer.

So, Jack, whenever we say in front of the camera that this isn't going to impact projects, under the auspice that legally we can't lawfully, we cannot decrease water rates.

The fact of the matter is is that we are more efficient as a department when those rates were negotiated.

And so what we're saying is that that 5% transfer is representative of about a hundred million bucks.

We have created that head space to make that transfer and know that we are not going to impact or slow down any of our projects.

There was a super long answer.

I'm gonna take a quick drink of water, but that was that's the answer to the question, Jack.

Yes, ma'am.

Okay, thank you.

Uh I represent East Houston State of Gas, Super Neighbor 4950, and what we're hearing from our community, people have are used to stretch and stretching budgets, but what they look for from the city is efficiency.

What I mean by that, it looks like there's a psychologist's term kind of fear and relief strategy.

You familiar with it?

It's when you cause discomfort and then you provide a solution or relief for a fee.

That's what we feel like we're a victim of.

So we are sitting here paying more to the police department, and some is rightfully deserved, but we don't issue tickets when people litter.

The mayor, we've I've I've suggested this too many times.

There is a $500 fee for first-time litterer, so that includes cigarette butts.

So if the city is about efficiency, let's tap that resource.

People are literally, you get a twofer, you get to clean up this city because littering is a gateway to illegal dumping, and you get to get resources from the people that are intentionally littering.

So I would like for you to take that back, Stephen, because we've been talking about this for quite some time, and people in here know how to balance the budget.

I wouldn't want your job, but there's an efficient way to do this without charging a fee.

Thank you.

I yield back.

Thank you.

Are you okay if I make a comment about illegal dumping?

Go ahead.

Okay.

So one of the things that that we've been trying to approach illegal dumping with is the city of Houston historically, and I worked under Mayor Parker and I worked under Mayor Turner.

And so I've been able to see perspectives.

And Jack in the Department of Neighborhoods, I know that you felt this too.

City of Houston has always taken a compliance perspective, not a punishment perspective.

That's generally how it's operated.

When cases arise, when illegal dumping cases arise to the point in which police can investigate it, meaning there's going to be some class A or Class B nexus there or felony nexus.

That's usually tied to illegal dumping inside of a ditch.

There's like a battery leaking or some oil, things like that, right?

There's an environmental perspective, and then they upgrade that to a federal uh a federal felony.

Um so the city of Houston's always had a perspective around um compliance over punishment.

However, and this started under Mayor Turner, it's continuing under Mayor Whitmire, and definitely under Chief Diaz.

The perspective is that sort of enough is enough, and I think we hear from all of y'all uh a lot about that.

Enough is enough.

And so there has been a reinvestment on the HPD side of the cameras that have been working.

The so the the work with Constable Alan Rosen was funded exclusively by ARPA, ARPA money has run out, and it while he did great work, it's expensive work.

And so we also found that our HPD environmental unit, which again goes for like those class A's, class Bs that could be upgraded into felony, actually had a very high higher success rate than the benchmarking that we saw with the constable's office.

Um, and so what we have done and what Chief Diaz is doing is pushing more money into that group and expanding the bottom side of it as well.

And so we're saying we're gonna go after lesser crimes for the purposes of doing that.

And Mayor Whitmeyer's made this commitment in front of in front of a microphone, and he said that before.

We're going all in on illegal dumping to be able to not just address it from a um an abatement perspective, um, which is going to be part of that nexus of solid waste being inside of the utility, establishing a revenue stream so we can issue more money.

We're not just gonna go buy single side loaders, right?

We're gonna buy the truck and trailers that it takes to go pick up the illegal dumping, all of that work that goes into it.

But additionally, um we're working with HPD to be able to go through going after the the folks that are the habitual uh the habitual illegal dumpers and catch them on camera and be able to prosecute it.

It is a very difficult thing to prosecute, and I'm I think all of y'all know that, right?

There's a lot of rules that go into how you write the ticket.

I mean, that's the you know, Department of Neighborhood code enforcement inspectors when they were the ones doing illegal dumping.

You do not care about this.

I would expect no one in this room to care about this type of stuff, but there is a very nuanced difference between early placed heavy trash, missed heavy trash, illegal dumping, and nuisance on property.

Like state law is super specific about this, and we have to all learn what these things mean.

It doesn't mean anything to y'all, it doesn't matter whether it's on the curb or on a private property, it's illegal dumping.

Someone came and dumped their boat, it doesn't matter if it's in a ditch or not.

Uh it's a visual blight.

And so those are the things that we have worked really hard to move out of the way.

It's the bureaucratic approach to a general neighborhood problem.

I don't think anybody in this room cares about those distinctions.

Uh I had them in my head, so thanks for letting me get them out.

But um, that's an important facet of that is that we have to be able to approach it.

So I'm not, I don't think that that's a full satisfactory answer to your comment.

It's not, I possess a criminal justice degree.

Yeah, and uh it's a class C misdemeanor to litter, it's a social problem.

I agree.

Again, if you take care of the social problem, it's a gateway.

So when you start making people intolerant of littering, then they're more prone as a deterrent not to legal illegally dump.

So you start at the forefront, you don't start at the end.

Thank you.

I agree.

Hi, my name is Beverly A J.

I'm with Super Neighborhood 68.

Yes, ma'am.

We as residents of Houston are always seem to be the one paying out who are the benefits.

In 2012, when um Mayor Parker was mayor, we started paying for a drainage fee.

It was three dollars for some and five dollars for other.

That's still another utility bill.

What has happened to that money?

Then when um the late Mayor Turner came into office, the first thing he was going to do was bring in new trucks, dump trucks, trucks for uh solid waste trucks, trucks for uh recycling.

What happened to those trucks?

I thought I saw a few.

Now when Mayor Whitman here, they're talking about raising the rates again.

We had water rates rates every year for five years, and we are yet paying.

But when we have problems, it's difficult to get service.

When there's there's broken water lines, people are being overcharged for from the water meters.

I have a friend that got $600, a water bill just recently, she lives alone.

So what are you doing to help us?

If we're going to just mean if you're going to raise the rates, at least benefit us.

I'm not for its budget.

I'll uh okay, I'm gonna answer that at a high level and think I'm gonna try and dive dive in a little bit on it.

Uh so the thing that I'll say is that government isn't perfect in the way that it applies, and I think you you referenced multiple administrations, and I think that we've been dealing with challenges for many decades.

So I definitely understand your frustration around that.

Um, but it is incumbent upon government to drive efficiency into what it does, right?

Modernization of technology, but more importantly, holding itself accountable to the performance metrics that are normal that you would expect.

How many times did a uh how many pipes has a city of Houston employee repaired?

How many pipes have they snaked to get rid of sanitary sewer overflows that are on the public side?

Um, what are that what's that work that they're going into?

And are they doing it with the same sort of vigor that you would expect you do your, I'm sure you do in your job every day.

And that's stuff that we have to work very, very hard to do.

I'll say that outcome-based budgeting was probably one of the more brilliant things that I think Mayor Turner brought in to the city of Houston because what it said is your funding is tied to success of your performance metrics.

Now, that doesn't answer to your question about the the more cost being extracted out of the consumer.

That is one of the reasons why.

Um it is one of the reasons why Mayor Whitmeyer said the cost the cost of a full tilt garbage fee in the city of Houston is 25 bucks.

If we benchmark that across the state of Texas and in the region, you'll see that that is about a little under middle of the pack.

I mean, you're seeing garbage fees as high as sixty-five bucks in Austin, lowest in the state compared to where we're at, is $14 uh in Fort Worth.

So we're coming in at five.

But the the point that I'm trying to make is that we are at a we're at a nexus where we are have driven a little over 200 million dollars of efficiency into the government.

We can I can demonstrably show you, and happy to take an offline conversation and walk you through exactly what we've done from an operational perspective because I sit in the position where we have to oversee that stuff.

Um we've driven about 200 million dollars of efficiency into the city of Houston, and the bites at the Apple are thinner and thinner and thinner.

And so at some point we have to have a conversation about the fact that there's a structural imbalance and we need to understand whether or not um the city of Houston uh is we have to have the conversation about what we want the city of Houston to do.

It's one of the reasons why the mayor wanted to suppress the the $25 fee um for a full garbage fee into a five dollar administrative fee.

The money that we are coming from is efficiency save the money that we're pulling the right-of-way uh fee from is efficiency savings and money that y'all have already paid to the city.

I don't think that any of y'all care whether you're paying a permitting fee, your property taxes, or a water bill.

You've paid the city of Houston.

Well, that transfer of 104 million dollars is coming from money y'all have already paid, and we just happen to be doing the function of water and sewer more efficiently, and we've created that head space for ourselves, which I think is a good thing.

I think that that's exactly what you would want out of a government is we're not we're not charging you that 104 million bucks.

We're finding efficiencies for ourselves, and so I I don't think that that's a perfect answer that you were looking for, but I think it's an important one because the city of Houston is driving more efficiency, and we've been working really hard at it.

Yes, sir.

Hi, Greg Sir just got a memorial Super Neighborhood.

I really appreciate you trying to stabilize the budget and being out here to also combat some misinformation that's been going around.

You know, for example, uh too many people throw around the term subsidy related to the six dollar per month reimbursement, approximately for 50,000 homes uh for not having city trash pickup.

But if anything, that subsidy runs the other way.

If all those homes were using city trash, the budget deficits would increase by over 10 million dollars.

That is a subsidy.

So but if anyone wants to disagree with my analysis, I'm willing to talk to you about afterwards.

My question kind of relates to what Jack was also saying about revolving on the CUS.

I'm not sure I completely understand the proposal and I haven't touched fund accounting since college.

So please correct me if I'm wrong.

So through our payments to the city for water and sewer, together with any federal and state grants and loans, the CUS has done pretty well in terms of getting equidity and also doing capital projects.

Let me finish my question, Doug.

It does not take that long.

So this you're trying to move the unrelated garbage collection cost of $100 million per year from the general fund to the C US without any consideration received by the CUS from the city.

The only reimbursement at this point would be the five dollars per month for the from the 383,000 residential customers.

Customers of CUS paid into the fund for water and sewer projects and expenses.

But now aren't we now aren't we rating the CUS funds or the by the city and directly transferring all the responsibilities and costs to the U C US?

Am I missing something?

Doug, it's a question.

You're out of time.

What I would answer your question as is from a legal analysis, the answer is no.

I'm not, I'll try to address the way that you couched it a little bit, but um the answer is that there the because the mayor, the cost is still the cost of the solid waste department, it's about 107 million dollars operationally, and then there's about nine million dollars of debt service.

That cost is still existent, and so yes, what the mayor has said is I only want uh the user, the solid waste customer uh to pay five dollars per month per household per month.

Uh there is still $20 of cost that exists per household per month that the city of Houston is choosing to subsidize on behalf of the solid waste user currently, and that is a temporary subsidy.

So, what the mayor, what we've laid out is that it will be five dollars per household per month for two years, two fiscal years.

Um, and at that point, the expectation that the mayor has set with city council has said it publicly multiple times, is that before it goes from five dollars after that, the expectation is that starting in FY29, it would go to ten dollars, and then each year after that, five dollar increase until it gets to the full cost of twenty-five dollars per household per month.

Um, what the mayor has committed is one, uh before it goes each time that it increases, it will be a vote of city council.

So that'll be the opportunity for all of the the users who would be burdened by this cost to come up and talk about it exactly the way that you are right now and be able to make your case to city council.

And I think there needs to be a whole fiscal context around that too.

Uh, but additionally, what this fund envisions, so I I I benchmarked every single fund across, excuse me, every single city across the city of Houston, state of Texas, uh, to understand what fees they charge and how often and um what discounts they provide.

So when you look at the state of Texas, we have uh again, I'll say Fort Worth as low as 14 a month, Austin is high as 65.

But if we look regionally, Pasadena is 34, Sugarlands 24, League Cities 22, Paralands 23.

These are just cities, right?

It doesn't, those don't include the unincorporated areas that are municipal utility districts.

We benchmarked those, those are anywhere between 23 to 35 dollars per household per month.

Um basically, unless you live in the city of Houston or you have acreage in which you like burn your trash, you don't pay a garbage fee, right?

That's just the city of Houston has never had one, chosen not to have one.

Um we also benchmarked.

So if the city of Houston was to throw itself up like this and do a full freight garbage fee, it'd be $25 per month.

But that five dollars, what we said was we wanted to understand all of the discounts that are provided that other cities provide.

So low to moderate income households, uh seniors, uh presence of a disability, veteran status, those are discounts that other cities have contemplated for themselves.

And so when we look at these and we actually look at the rates that people in their special unique circumstance have, nobody's even close to five.

The lowest is 10.

Which is why we were comfortable saying, yeah, a fee is painful.

I'm not disagreeing with that at all.

Nobody willingly says, yeah, go ahead and give me a new fee.

But it is standard in every jurisdiction in the state of Texas and across the United States for fee for a fee related to solid waste to be levy because it's considered a use.

There's a lot of conversation about it being regressive.

I'm not totally in disagreements with that.

But the fact of the matter is, that's what it is.

And so by having a $5 fee and having it stabilizing it for two years, that allows us to have the articulate conversation with the public about what do we want to do with regards to discounts.

What special circumstances do we want to account for?

And we've already done that with the water fund, by the way, not for nothing.

There's the water fund.

The water fund is intended for people who cannot make their water payments.

And another question, and this is jumping ahead a little bit.

Maybe somebody's got this question.

I've heard, well, what happens if you don't pay your fee?

Well, it's the same thing that happens if you don't pay your taxes.

911 still shows up, right?

Like, just because you're tax delinquent doesn't mean 911 stops showing up to your home.

We will still pick up garbage, and that's a standard thing for every single city.

There's no city in this list in the state of Texas that I'm aware of that says if you don't pay your garbage fee, we will not pick up your garbage.

The city of Houston does what it always does, and I'm going back to my comment to Jack.

The city of Houston goes for compliance.

They put people on payment plans and they do it as low as possible.

So that that's sort of the way that the city approaches it.

So I don't necessarily like the way that you're couching it saying it's rating a fund.

I don't think that it is.

Um, and the reason why I don't think that it is, is because we're not taking away from projects that exist.

We are we've driven efficiency into the department, we've created the liquidity within that department within that that fund to be able to allow for what the state says is already available to you.

No, actually, let me, I'm sorry.

Can you give me like two?

This is about to be a super detailed finance question for all you finance bros out there and and broettes.

Congratulations for those who don't, I'm sorry, you're gonna fall asleep.

Uh water rates are calculated on two things opEX and CapEx.

So this is going to be our opera and debt.

Um, this is gonna be our operational spend, how much we go into debt, and then what our debt service payments currently are.

This is a normal thing, it's how everyone calculates their rates.

Effectively, what is the cost for running the department, water and sewer in this example, and how does that translate into rates?

Well, whenever the city of Houston went into a consent decree, they had to say, what is OpEx, what is CapEx, what is debt service?

Also, what's the federal government adding to us?

And that number for Y'all's edification is two billion bucks.

So they said you got to cover all this plus two billion over the course of X number of years, and I can't remember it off the top of my head.

Um, the thing that is important about this is the way in which it's called the flow of funds, um, that's a very distinct debt finance term.

So when you are talking about um rates, because you include all of those things, um, the lien holders are part of that rate calculation.

So y'all all, if you have a mortgage, you know about this, right?

You've got a first lien on your home, but if you've ever done like uh improvement to your home and uh you paid a contractor to do a 20, 30,000 dollar improvement to your home and you collateralize part of your home, that's called a mechanics lien.

That is considered like a third tertiary lien that uh folks, so if if the government, you owe the government money, government gets the first your mortgage company gets the first cut, government gets the second cut, the mechanics lean, or the the developer builder, contractor gets the last little bit, and then it goes down.

Well, city of Houston has debt structured just like that.

We've got first lien holders, second lien holders, third lien holders, and then it goes all the way down to the flow of funds, goes all the way down to what's called the bottom bucket.

Bottom bucket is unrestricted, unencumbered funds.

And those bottom bucket funds are where we're pulling the five percent from, which is part of the operational efficiency.

So by design of where we pull the money from, it will never be calculated into a rate study.

So this will by design not increase your races, your races, your rates in future rate studies, and that's the reason why this is just fine.

That's a super complicated answer.

I apologize as y'all wake up and go, What did he say?

Uh, but there is a very detailed finance explanation as to why this is an important thing is that we are pulling from bottom bucket funding, which is representative of us driving operational efficiency.

Thanks for waiting.

Thank you so much.

You're fine.

My name is Lindsay Williams.

I'm uh president of Super Neighborhood 64 and 88, which is greater eastward Laundale Wayside.

You know me from the trains.

Yes.

I'm asking a question on behalf of one of our residents, uh, ask for me to uh put this out here.

Uh we have seen solid waste workers ask for safety equipment at City Hall, and I'm sure they're underpaid.

Could you tell us why none of our $5 fee is used to protect or pay the workers of solid waste?

Boy, that's a loaded question.

This is a way to think about it.

Um, how do I want to frame this?

Uh by nature of the utility of us declaring it a public utility, it is being lifted out of general service or general fund and put into the fund itself.

The five dollar fee does nothing to fully compensate the cost of solid waste.

We are still, but what it does do is it allows us to identify a revenue stream to begin doing capital purchases for the stuff that you're talking about.

This isn't just about new trucks, it doesn't just about transfer stations, which I haven't talked about transfer stations, but I'm gonna talk a little bit about it, um, about driver safety and efficiency.

Um, but this will allow us to do those capital purchases, because right now, when we do debt issuance, there's three types of debt funds.

So there is the if you're remembering the uh the three buckets.

We've got general fund debt, which is considered general government debt.

We have airport debt, which is airport debt, and then we have public works debt, which is broken out into those little funds.

So we have uh drainage, not drainage debt anymore, but we go cash in hand with that, but we've got water and sewer debt that we pay for.

Um, solid waste as it exists, sits inside general fund or general government debt.

So that means that they are competitive with all of the other departments.

So when we are thinking about solid waste and solid waste equipment, we are saying we've got a very old fleet, we got to buy new trucks.

We have transfer stations that aren't working, we got to do those improvements.

But we're also hearing we need more cop cars, we need more ambulances, we need more fire trucks.

Uh, we need to go improve the roofs at our libraries, we need to purchase more, refresh the computer equipment for our libraries.

All of these things are competitive, and I I mean, I this is literally something uh the council member Alcorn is gonna have to deal with out of her committee.

We call it our CIP process.

Y'all are quite familiar with that.

Um I just sat down and approved the uh the next CIP issuance with the mayor of um where we have four billion dollars of requests over the next six years, and we can afford one billion of it.

Right?

There is always it is constant famine inside the the debt issuance, and we have about 100 to 125 million dollars a year that the general government gets to issue debt on and play with.

And so you've got to ask the the question has to be asked is in a in a world of priorities, how do you prioritize it?

And uh that's one of those things that we hear from the solid waste uh solid waste employees.

It their safety is paramount.

There is no question about that whatsoever.

But what we've seen is um as budgets get squeezed.

Uh, here's a great example.

Um the city of Houston allowed the solid waste department to remove itself from the maintenance roles of our general services department.

So general services is responsible for all this stuff, right?

There's a maybe a bad example.

There's a broken elevator in the back, and they've got to repair that.

And there's all these things that General Services maintains.

Well, solid waste facilities was one of them.

Fleet manages the fleet, but the facilities, they are managed by general services.

Well, uh they were allowed to say we're gonna we think that general services charges us too much to do the repairs and the maintenance of our facilities, so we are going to uh maintain them ourselves.

And at that time, that administration said okay, that's fine.

And what happened was the very next fiscal year, and I'm I can show it to you in a budget book.

First thing that was cut maintenance of the facilities.

So what we've seen, we have five transfer stations across the city of Houston.

These are strategically placed locations.

This is northeast, northwest, southeast, southwest, and central.

Two of them work, two of them are operational, and it's southeast and southwest.

So what that means is that if you're in a community north of I-10, your guys are picking up their trash.

They're driving down usually an hour to an hour and a half uh based on average drive times that we've been calculating.

They drop off at the transfer station, and usually they're if depending on a heavy trash day, they're either a third to about a half done with their route.

They dump it, they wait in the line about 30 minutes long, then they go about an hour, hour and a half back up to y'all's community, pick it all up again, and then go back and do the thing.

And what that creates is a flow down of catastrophe for funding.

It creates it puts extra miles on trucks, it makes these drivers work longer hours in a day.

It puts them in unsafe positions, just like you're saying.

The most dangerous thing a heavy vehicle, you didn't ask this, but the most dangerous thing a heavy vehicle can do is make a left turn.

It's one of the reasons why like FedEx and UPS is revolutionized that they do three right turns before they ever do a left turn.

Um, and so not only that, it puts the miles on the trucks, it makes these guys work longer hours, it makes them have higher overtime.

So we are hammering our capex side of things.

We're putting a bigger deferred liability on maintenance of our facilities, but we're also causing operational costs to go up, which causes us to have less money for maintenance of those facilities.

And so I say that to say and give a long-winded answer to your your question about we can now prioritize those things because we're fully funding it in the in the utility, but that new revenue stream, that five dollars, is representative of us having a dedicated revenue stream to exclusively solid waste.

So we can go and we can improve those transfer stations and open them back up.

Those three transfer stations, I would encourage y'all to just go drive by them every once in a while.

One of them is the Gazmer site, another one is in the I can't remember the other ones, not the Judea site, but it's northwest and northeast.

There's one that has like a 25-foot hole in the roof.

There's others where there's like wiring exposed.

There was like six inches of standing water.

I no, no kidding.

I went to the Gasmer site and like three boar ran by me.

I was like, where are we?

And this is it's real.

It's like the reality of Houston that we had to deal with.

And so these are this represents us being able to put money in dedicated streams right to that stuff immediately.

Thanks, Lindsay.

It's good to see you.

Hi, I'm Lisa Hines.

I'm the vice president of 6488.

Um, I want to tell you about my friend and neighbor Harold, who is on social security and receiving Medicare.

And he just got his food stamps cut, and he lives in a house that is falling down, and he's getting some public assistance to help with that.

Um but he makes in a full month, um, in a full year would I make it a month on my retirement income.

I think the taxation process in Texas is inherently regressive.

And I think the fact that we are rolling out a five dollar tax fee doesn't comport with your own study about what it would take uh to really make the um trash issue go away.

And um it's a political ploy uh because we all know that that fee is going to have to go up.

As a pastor facing uh working with people who were facing amputation, you don't do an inch at a time.

If you have to cut above the knee, you cut above the knee.

And I would suggest that the city needs to do the same thing.

I can afford it, and I would be willing to pay a subsidy for my neighbors who can't.

Thank you.

So we do intend, uh thank you, Lisa.

I appreciate that.

We do intend on creating a solid waste fund the same way that we have a water fund, and that's gonna be to help folks exactly in your neighbor's situation where there are people who cannot make that and they can draw down from that.

And it's usually intended for low to moderate income households, but also people who just have had a terrible set of months, right?

It's also a temporary use, not just a permanent one.

Um, I disagree with the idea that we should just go to 25 bucks, and that's the perspective of of the mayor.

The idea here is that 25 going from zero to 25 is a household shock, right?

That is 300 a year, $5 a month is $60 a year.

Nobody wants to impose a fee on themselves.

I'm not disagreeing with that notion, and I I don't I hope you hear me when I say that.

But the idea that we have the perspective that the mayor has on this is that five dollars is a start.

It's a it's a required start, right?

We have state and ordinance law, we have state law and ordinances that necessitate that when something becomes a utility, you have to charge something for it.

And the something is calculated in a rate study.

And uh, I would love to talk to you about the rate study.

It does say that $25 per household per month is the cost to provide services that we currently provide.

If you wanted to go up and flex up and do things that the city of Houston doesn't typically charge for, they largely called it the clean city fees.

That's something that's else there.

I don't necessarily agree with the notion that it's a political ploy.

I think that it's trying to be respectful of the fact that there is going to be a fee in existence that had not been there before, and we wanted to be sensitive to people's pocketbooks while also being able to do the thing the government needs to do, which is purchase more solid waste vehicles, replenish that service, but more importantly, start to establish long-term fiscal stability that gives us the opportunity.

So we don't have the existential conversation every year about what libraries are we gonna close, what uh what parks are we not going to open?

We have 30 uh what 37 swimming pools across the city of Houston.

What swimming pools are we not going to open this summer?

Because that costs money too.

So we're trying to strike the balance between the two.

But I appreciate you coming up, Lisa.

It was good to see you.

My name's Ken Rogers, president of Greater Third War, super neighborhood, number 67.

Um I love your slide.

My question is, how many of those cities pick up once a week?

Like Houston does.

Oh, I don't disagree with you that this isn't gonna be enough.

Uh, I I so let me let me frame you a little bit.

If you're okay with this, uh, so this is the structure of the the detail of the fee.

Um, so for y'all in the back, orange is representative of the subsidy uh that we would be providing, green is representative of what the user would be uh the the solid waste customer would pay for.

Five dollars for two years and then presented to go up uh up to 25.

So the thing that you've heard me say is that the cost of solid waste is twenty-five dollars per household per month.

But what I said at the beginning was that by design, that fee study had to imagine that the department as it runs today is efficient, and it's not nobody, nobody here agrees.

So as we drive efficiencies, this cost is gonna go down.

It won't be twenty-five dollars per household per month anymore.

I think it'll be closer to twenty to twenty-one.

And the question that the policymakers get to ask is: do we want to keep it at 25?

Do we want to stop at 21 and keep service keep an efficient set of services as we have it today, right?

So this is gonna be your current uh garbage recycling heavy trash uh schedule, yard waste schedule, or do we want to add an extra trash day?

Keep it at 25 and add a second trash day.

Maybe maybe we do heavy trash uh twice twice a month instead.

I think there's a lot of different questions that the policymakers are gonna have to have, but I could tell you from an operations and a fiscal perspective, this is about as expensive as basic garbage service could be in the city of Houston.

And as we drive efficiency into the department, that number will go down, and that will give flexibility to city council and to the mayor to be able to say what is enhanced trash service.

What is like, you know, because if you look at a mud, you're talking about two two trash days a week, recycling on the first part of the week, heavy trash, up to a certain point.

We do nine cubic yards, most muds do like four to five cubic yards, but uh, you know, uh at the back half of the week.

So could we get to that service?

I think we absolutely could, but it's gonna take operational time, and that's part of the reason why we want to keep it at five bucks.

Is there anybody else that wants to ask a question first?

Okay, we've got some people that want to ask a second question.

So, I think the first question.

Hi, Andrew Mickelson, Super Neighborhood 30, sir.

Uh it was brought up earlier about the uh uh if there's private trash service, there's a fee credited back on the water bill for c for those customers that don't spot the city.

So is the city going to do away with that with this fee going in?

So for everybody, and then the other question that I had was um are the the five dollar fee going to hit also hit those people that get private trash service?

It's a good question.

So by design, we can't charge a fee for a service we don't provide.

Uh by by law, we can't do that.

So they they through the contract that the city of Houston established, this program goes back like 25, 30 years.

But in effect, for those of y'all have not who've not heard of this before, there are communities in Houston that have entered into an agreement with the city of Houston and said by law, the city of Houston under state law as well as federal law, we have to when you incorporate, you have to provide a certain set of services.

And so we can't just like have a conversation tomorrow.

You say, Steven, I don't want you to pick my trash up anymore.

And we go, okay, like there has to be a contractual agreement because there is a core service tied to this.

It's the same way that you can't just say, Cops, I don't want you to come to my house anymore, right?

It's just a thing.

Um, so the what the sponsorship program envisions is that communities, again, like 25, 30 years ago, if communities chose to opt out of the solid waste system, they would enter into a contract, typically through their HOA, um, to exit the service of the city of Houston, and the city would have to give something in return.

And so what that was determined to be was six dollars per household per month.

Some folks call it subsidy.

The program is technically called a sponsorship.

In effect, what it is is it's a contract in which the city of Houston must give something to someone who they are no longer serving.

Um, and so that is the extraction of the funds that go into those communities.

There are about 50,000 homes across the city of Houston.

We have a potential of 450,000 customers.

Uh, there are 400,000 customers that don't have that uh sort of contractual agreement.

So the city of Houston uh doesn't serve about 50,000 customers uh through that sponsorship program to the tune of about six million dollars a year.

Four to six million dollars a year.

Um don't quote me on that, that might be rough, but it's anywhere between four and six, and uh the I'll say two things.

One, I absolutely think that that policy conversation needs to be had at City Council.

Uh I don't think that the current cycle as well as the current efficiency of the Solid Waste Department is going to anywhere, anyway, compare to the private service that these communities choose to have.

But I also think that there is no way in the current state that the city of Houston could pull the plug on a program like that and potentially absorb 50,000 new customers without having catastrophic effect on all consumers in the city of Houston, uh who receive solid waste service.

So, at a high level, that program exists uh way longer than we any of us have been at the city, but uh that program exists, it will continue to exist, and because it's a contractual agreement and because we do not serve them, we cannot charge them a fee for something that we don't serve them for.

Okay, they're not gonna be right.

Yeah, I got it.

Uh hey, look, I'm uh Ms.

Rainwater from uh Super Neighborhood 41 Presidents 41.

Uh my question to you is this why is it not uh business as well as residential?

Why can't we do a business?

You know, the businesses get a different fee than uh residential because uh the state has allowed our communities to have businesses within them like halfway houses and different types of things, and they put generate a whole lot of trash, and so those neighborhoods are being punished in a way um, that type of of pickup that you gotta do because when those people move out of those houses, they put a whole lot of trash out and still you have to pick it up, and so they're paying the same five dollars that this man's paying that I'm paying, but they're running a business making you know, a lot of money.

So for what it's worth, Mr.

Rainwater, that shouldn't be happening.

Um so if they are a commercial establishment like a boarding home or a halfway house, they are a business with a certificate of occupancy, which defines them as a uh which and they're defined as a commercial establishment.

The city of Houston Solid Waste Department does not serve commercial establishments, they don't serve apartments.

So if that's occurring, contact your counselor, contact the mayor's office, flag that place quietly.

We we do anonymous stuff like that.

But that is something that we should not be picking up their garbage if they are a business.

But it it occurs, and the reason that it does is that they're not sticking a sign-out thing in real business.

Well, yeah, of course not.

But if they're operating as a if they're legitimately operating as a boarding home, they have a license that the city of Houston gives them.

So those that don't, it's a whole other host of problems.

I'm sure some of you, president, you know that there are those things in your neighborhood.

Yes.

They're not going to come up and tell you that, but the thing is they're supposed to be licensed.

Yes, sir.

But the state and the city, they don't deal with these things.

And like I said again, you can tell there's no homeowner that's putting out 18 mattresses, two sulfur's and stuff every other week.

There's not a homeowner doing that, but that's what you have in uh different communities, which I understand.

Uh but that's that's the thing.

So we need to, you know, just the last question.

Hi.

Good evening.

My name is Sylvia Rivas.

I'm the president for the Brays Oak Super Neighborhood Council 36.

And so uh have a good question about these homeowners that choose the private.

I live in a community and also represent a number of communities that have private service pickup.

So you're saying that they're not going to be able to be charged for this additional service.

How is the city going to be able to identify those homeowners?

So we have a really comprehensive list.

So this is part of the automation of the routes themselves.

So we we this is not to sound overly creepy, but like we know who y'all are.

And we do, but we have all of your addresses, and it's put into the database that we have of this the her the sums that we serve.

So we do know who y'all are.

Um again, try not to be super creepy about that.

Yes, ma'am.

Steven, uh this is that's the last question.

I just want to say without sounding pandering, uh, this is the first time the Super Neighborhood Alliance has ever had an administration that was willing to do this, and uh I think we all thank you for that.

So we're strictly.

Thank y'all.

I appreciate it.

Thank you, Stephen.

Thank you.

All right, guys, thank you guys.

Thank you.

Thank you so much, Steven, for your time.

Thank you for being here.

Thank all of you for me.

Oh, yeah.

We would we would love to have our regular meeting after that, but I'm sure everyone is absolutely exhausted at this point.

Number one, if you have not signed in before you leave, we ask that you do sign in at the table over there so that we can recognize your super neighborhood as being present.

That's number one.

Number two, if anybody has any burning announcements, Rachel, okay.

I want to make you all aware.

Jane Cahill West, uh, many of you all remember Jane.

Uh, she just sent me a text, a very disturbing text.

There was a drive-by shooting at a resident's home, and they waited for the police to come for 12 hours, and when the officers got there, they told them that uh they could not pick up evidence that they had to do it themselves.

And HPOU told Channel 2's reporter, they don't work on weekends.

Now, this is very disturbing because, see, I don't live far from where you all saw the short-term rental shootout that occurred last night.

So I'm hoping somebody can get to the mayor because I need to know how the hell you gonna tell a person that had a uh drive-by shooting they gotta gather the evidence they self.

Uh, the police and the fire department both got raises.

I'm disturbed that they don't want to work on weekends.

Thank you.

This was on Dick on uh uh the shootout that was in my neighborhood.

But where this happened, I was on channel two.

I don't remember the address, but they I mean that's unconscious.

But I want to make y'all aware of it because I didn't know the police don't investigate on weekly okay, can I have thank you?

Hi everybody, I'm Sally Alcorn.

I'm one of your at-large council members.

I think I know most of you, and I chair the budget and fiscal affairs committee.

We are having a budget town hall.

If you want to hear Steven again, uh at 10 a.m.

at the Fondy Rec Center, he'll be doing this presentation.

Please tell your communities, you know, get that out if they would like to hear this.

I think he did a great job of explaining some pretty comprehensive stuff.

Um, also, your two cents.

I do this with the Kinder Institute at Rice.

Thank you.

We're getting great responses.

I read a lot of the comments at City Hall, everything from I'll pay more for better service too.

If you charge me one more dime, I'm gonna kill you.

You know, like I got them all.

It's a very, very many uh different comments, but please fill out the your two cents thing.

And another thing that's happening this week, I've talked to a few of you about is you know, we're looking at the open space ordinance.

This is the park dedication fee.

Um, if you're um concerned about parks in your area that need a lot of help and attention, uh this is one of our funding sources.

Now, right now we're looking at the the city.

This has was a program started in 2007.

It charges multifamily and single family developers $700 per residence for a fee in lieu of parks.

You can donate park land or have private park on your on your area, or you can pay the fee.

We've raised about $100 million dollars since 2009 with that fee.

We've improved over a hundred and ninety parks, and we've purchased 65 acres in new parkland.

The fee has been 700 for 20 years.

Um also something about that um about that program is there are about 20 plus sectors, park sectors, and the all the money collected within each sector stays in parks within that that sector, that exact sector.

So it's you can more, you know, affluent areas of town have more development, more park money, better parks, where there's some areas of town that don't get that money.

So one of the changes that's being proposed is that 30% of the money that's collected within each sector will be just able to be distributed citywide.

That's a great change that the administration's putting forward.

We're also lining up the open space ordinance with um some state recent state legislation that's that's occurred.

What I'm advocating for, we're not gonna do it right now, we're gonna let the budget pass and go go get on down the road a little bit, but I am advocating for an increase to that fee.

So if anybody would like to, there's a public hearing at 2 30.

I know Letitia's coming, some others at the public hearing at 2 30 at Planning Commission this Thursday, and there'll be other opportunities as well, but I'm going to be there advocating for an increase to the fee.

Just CPI alone would increase it to $1,113.

Um appraised values would increase it to like $1,400, but the max the state will allow us to go to is like $1,265.

So if you're interested in advocating for parks in your area, the public hearing is at $230.

Uh this Thursday, I invite you to come.

You have a couple minutes to say, please provide more funding for the parks.

Um at the planning commission in the city hall annex on the public level.

And again, we're not the administration is not putting forth a fee increase right now.

Um, you know, we're going through the budget and everything, but Mayor Whitmire is open to exploring a fee increase, but he needs to hear from stakeholders, both residents and of course the development community.

So I imagine uh couple months or so after the budget uh process will come back and and look at opening up the fee.

But for now, we'll for sure do the 30 percent thing and and line that up.

So thanks you guys.

Oh, and the but sorry, the another budget town hall.

There's one this this Saturday, Fondi Rec Center at 10 a.m.

and a virtual one May 20th at 6 p.m.

And all that information will be up on my website.

Thanks.

Thank you.

All right, can we have a motion to adjourn?

In a second.

All right, y'all have a great night.

Thank you again for coming.

Thank you.

I was coming from here.