Okay, welcome everyone.

I'm Sally Alcorn and I chair the budget and fiscal affairs committee for the city of Houston.

And welcome to our second annual uh budget town hall.

We'll do this one this morning, and then we'll have another one on May 20th, the virtual one at 6 p.m.

And I'd like to introduce my vice chair of the committee, Mario Castillo, who represents this area as well.

Thank you, Sally.

Welcome, everyone.

Uh I do want to acknowledge some of the folks and resources that we have in the room for you to visit with after the presentation.

So we are joined by Councilmembers Peck, Councilmember Martinez, Councilmember Julian Ramirez.

Also, we have Solid Waste Department at the back with the table, the League of Women Voters, Baker Ripley, 311, Houston Fire Department Chief Galvan is here in the back.

Super neighborhoods 65 and 82.

Our finance director, Director Dubowski, and representatives from the city controller's office right over here.

So when we are done with the presentation, and uh if you have additional questions for those resources, they're here for you.

Don't hesitate to go and visit with them.

Yes, we all we also have public works who's joining Solid Waste.

You'll hear more about that at the Solid Waste Table.

So Public Works is represented too.

So you're you're welcome to visit these tables when we when we get wrapped up here.

I'd now like to introduce the mayor's.

I'm gonna get this right.

Uh uh Chief Opera Chief Strategic and Operating Officer for the City of Houston.

Sure, he said.

I think I might have butchered that.

But he's a big he's a big deal with the mayor's office, and he is going to do the budget presentation.

This is probably his uh eighty-fourth time to brief a group on the budget.

So consider yourselves very lucky.

It is a very thorough discussion.

I heard it uh Monday night at the Super Neighborhood Alliance.

So, with no further ado, I'll bring up Stephen David.

Good morning, everybody.

We'll see if we have a laser we do.

Can y'all see that laser on the screen?

Okay, perfect.

So, what I'm gonna do is I will try and get through this as quickly as possible.

I think it's more important to be able to answer questions and have a dialogue than to listen to Steven do his TED talk.

Uh, although I have done it 84 times today.

Uh so I what I'm gonna do is walk you through what the city of Houston is, um, at a very high level, walk you through where the city of Houston is at with regard to its fiscal situation, and then talk to you about what our uh the very two high-level things we'll be doing with our budget uh with FY27 and what that does to the fiscal future moving forward.

And then I'm happy to open it up to any questions as long as the uh chair and vice chair are okay with that.

So, City of Houston at a glance, we are three big buckets.

The first big bucket that we have is called an enterprise fund.

Enterprise fund in our world means an enclosed business.

It's a fee service.

So instead of receiving tax revenues, their revenues are based on a fee.

So airports, for example, every time that you purchase a ticket, every time that someone lands in Houston, there is a $4, $5 surcharge on the ticket that exists already, and it's called the landing fee.

That's basically what funds the airport system.

So there is bucket number one, that's the Houston Airport System Enterprise Fund number one, which is about 1400 employees, 740 million dollar budget.

Large bucket number two, Enterprise Fund Public Works.

Public Works is actually broken out into a whole bunch of different funds, but I'll say they're six big funds.

And this is gonna be stuff like your streets and drainage, building inspection, water and sewer utility.

Those are examples of the sort of big sweeping funds that we do.

Uh but there are 4400 employees inside that department, and it's got about a $3.5 billion budget.

And then we have the general fund.

General fund is everything else.

So think police and fire, libraries, parks, health department, and then what we call our corporate functions.

So this is gonna be IT, HR, general services, finance, legal, all the stuff that we have to have internally to run as a municipality, the same type of stuff y'all have in your day-to-day jobs, HR as the example.

It's 12,500 employees, three billion dollar budget.

We have roughly 21,000 employees in the city of Houston.

So that's what we are at a very, very high level.

City of Houston Revenue Caps.

So this graphic, it means a lot less when you are far away from it because the the writing is so tiny.

So I'll describe it as best as I can.

The City of Houston sits uniquely in the state of Texas under two different advalorum, also known as property tax revenue caps.

The first one is the one that all jurisdictions are under.

This is called SB2.

It was passed in 2021.

And what it says, the state has said that no jurisdiction can increase their property tax revenue higher than three and a half percent compared to last year's revenue.

Um, there's a lot of nuance and caveat to that, but in effect, what it does is it creates a limit for, so if we have, you know, a hundred thousand, which is a high end but reasonable number, 100,000 new Houstonians that come in.

Our breakout is 6040 for homeowner versus apartment dweller, generally in the city.

So if we get 60% of that 100,000, so 60,000 new homeowners that will pay property taxes, bless you, Bill, that pay property taxes.

Uh if that growth shows up to be five and a half percent of value coming to the city of Houston, we'd only be able to collect 3.5%, effectively making two percent evaporate.

So that is what is that's what the RevCap means for our perspective.

Now, uniquely, this is every every city in the state of Texas is underneath this.

Uniquely, the city of Houston has its own self-imposed revenue cap.

This was enacted by the voters in 2004.

There's one called Proposition 1, so that was 2004, and then proposition H, which is 2006.

The 2004 vote, proposition one, created a formula, and what it said is that the city of Houston is capped at its property tax revenue at the lesser of 4.5%, or population growth as a percentage plus inflation.

So if we see inflation numbers of let's say 2%, and we had a population growth of one and a half percent, that's 3%.

We can only 3.5%, we can only collect 3.5%.

We can't collect the 4.5%.

Now, if that formula comes out to 5%, we're capped at 4.5%.

The interesting thing, and this is sort of where our hands are tied behind our back, is specifically the population growth as a percentage.

Um, the reason why is because the city of Houston doesn't get to just tell y'all what our population growth has been, it's validated by the Census Bureau, which I'm sure you all have all heard about.

And what the Census Bureau does is they establish a two-year lagging indicator on population growth.

Meaning, as we set our tax rate for 2026, I can we can only look back to 2024's population growth.

So we grew in 24, roughly, let's say 50 to 70,000 people.

Um, everybody that moved into Houston in 25, everybody that moved to Houston in 26 cannot be counted.

Doesn't matter whether or not they're here, we cannot count them towards our revenue, but we are still serving all of those new Houstonians.

So we have to serve 911, 311, you know, trash, all those new things out of the general fund.

And what that does is it creates a compression on the general front, serving more people with less money that we can't account for until two years later.

And so when we say that we have the most restrictive property tax cap in the state of Texas, that's what we mean when we say that.

Compared to other cities, it does not, it is not as fair or equitable across the state of Texas.

So, how does this property tax cap come into real life?

What it means is that the city of Houston has a as you this this sort of dwindling bar graph here, the histogram that's dwindling, is representative of our actual tax rate itself.

So in 2000 uh, excuse me, I think it was 2015 is the first time that we hit our uh the property tax cap for the first time.

And what that meant is that the next year we had to we had to decrease the tax rate for that fiscal year.

And ever since then, it has decreased.

And so we started when I started at the city of Houston with uh Councilmember Alcorn, it was about 63 cents.

Now our tax rate is 51 cents.

Now, what that equals to the homeowner, it's not necessarily a totally bad thing.

What that equals to the homeowner is about 400 a year in savings on their tax bill, but what it also means is that the city of Houston typically have less money to be able to serve people out of the general fund, meaning going back to the general fund, we're talking about libraries and parks and health and our corporate functions y'all don't care about.

But libraries, parks, police, fire, and so everything becomes more competitive inside of that fund as we dwindle down.

So I this is a little bit of a complicated slide.

I'm gonna go through it pretty quick.

I'm gonna not ask that y'all take my word for it, but I'm happy to answer in detail if you are interested in it.

But comparatively to other cities in the state of Texas, the city of Houston's biggest challenge is that we have what we call lack of revenue diversity.

So there's a whole bunch of things that feed our general fund.

As you remember, the enterprise funds are a business, so airport, airports, enterprise fund, you get a fee or a fare that's paid for on your ticket that you buy with public works.

It's also a fee for service you pay for your permits that goes into the permitting fund.

You pay for water and sewer that goes into the water sewer utility.

Well, with general fund, typically it is paid for by taxes and then fees for people to operate inside of the right-of-way.

Other cities across the state of Texas, so what these these the stacked bar represents is the different revenue streams that go into their general fund.

So blue is the tax rate itself, green is a garbage fee, yellow is a water utility, and orange is an electricity utility, whenever the city controls that electricity utility.

And so what you see is that we actually have quite a lack of revenue diversity compared to our peer cities.

And what that means, what that makes them is more resilient to weird economic downturns that we might feel.

So the two biggest revenue sources inside of our general fund are property taxes and sales taxes.

So sales taxes, as you know, as we see gas prices go up, consumer behavior tends to change, and people spend less money, and so we see sales tax take a dip.

So that makes us more susceptible to a sales tax dip than other cities because their revenue streams are diversified.

Same thing with the property tax.

In 2008, 2009, when the real estate bubble burst, we saw an absolute plummeting of uh property tax revenue.

Other cities didn't feel it as badly because they are more diversified in their revenue streams.

So what that means from a perspective of Houston versus Dallas versus Austin San Antonio is that we are less resilient in regards to being able to deliver services through our general fund than other cities during tough economic times.

All right, so that was the uh the preamble, get ready for it.

Uh so uh the city of Houston, Mayor Whitmeyer's been in office with this council for the past two and a half years.

We started January 1 of 2024.

By design, each new mayor finishes out the last six months of the final budget of the previous mayor.

Our fiscal year is July 1 to June 30.

So when we come in January 1, we are finishing out that six months.

That's actually a really good thing.

It's kind of a blessing because you're trying to figure out where the bathrooms are, where the light switches are, all the stuff, but more importantly, you're trying to figure out who the team is gonna be, how you're gonna put them around them, how you want to operate, sort of understand the city itself.

So, what we tend to describe the first year as is one of learning and one of reaction.

And I say reaction because, and I'm gonna refresh all of y'all because this is like a fresh trauma for the electeds and the staff as well as for Houstonians that had to deal with it.

So, within the first seven months of this administration, we had the college football playoffs, which is awesome, but that adds about 300,000 people to Houston.

So we're seeing stressors across all of the services that we deliver.

We had two weeks later, we had a four-day persistent freeze of sub-20 degree temperature, which created a whole bunch of issues.

But more importantly, it was uh for the folks that weren't in Houston in 2021.

This might not mean a lot to you, but for the people who were in Houston 21 with winter Storm Uri, it created a whole bunch of panic and fear, right?

We had long freezes.

Are we gonna is it gonna happen the same way that it did?

Is Center Point going to be able to keep electricity on type of questions?

But then we had 264,000 uninvestigated police incident reports.

I don't know if y'all remember that scandal, but that one was a bunch of gray hairs on this side of my head.

Uh we had uh the high water bill debacle, so we were seeing residences get 10, 15, in some cases $20,000 water bills, and the public works department could not prove that that water was consumed.

So we were sending them these bills, and it became a huge scandal.

Um we also had uh Kingwood floods, so there was pretty catastrophic flooding out of Kingwood from the San Jacino River, both forks flooded and just sort of poured water into that community and surrounded them with water, effectively creating an island.

Then we had uh the Derecho, which was the straight line 120 mile an hour wind that swept across Houston from west to east, and then we had uh Hurricane Barrel, and that was all within the first seven months.

And so when I say we were a city of reaction, there you go.

Uh, but more importantly, what we did was we said we have a hypothesis.

Uh, this was led by Mayor Whitmeyer, with that we have a hypothesis that the city of Houston is inefficient.

Uh what we wanted was to be able to figure out where and how we can act on that intuition and how we can prove it or disprove it.

So we hired a third-party company to come in and do a uh a high-level assessment across four different sections.

So the first was an organizational assessment.

So, what is our organization look like?

What's the shape?

Is it a pyramid?

Is it a diamond?

Is it, you know, middle managers are weird, you know.

What is it and how does it look?

Um, what are the spans and layers to it?

So, how many distant how far away are people from the mayor?

So is the mayor's message getting down to frontline and are all the problems happening at frontline getting back up to the mayor.

We did a performance assessment, so this is understanding what our uh key performance indicators are, how well we stack up against our peer cities and whether or not we're meeting the promises that we make to Houstonians.

We did just a spend analysis.

This is no different than y'all just looking at you going, all your reoccurring spending, like going to rocket or rocket money or whatever you use, uh, to be able to understand uh what am I spending my money on?

How frequently does it come out?

What's the automatic stuff that I've forgotten about.

We looked at that and sort of deconstructed all spend in the city, and then we did something called a forensic accounting analysis.

For those of y'all not familiar in the finance world for this, basically, when there is irregular behavior in your spend, there are ways to pressure test that and look at it from a data-driven perspective to look for fraud, waste, or abuse uh within your organization.

It turns out that there was some.

There was quite the scandal about three years ago where we had a public works employee steal about four and a half million dollars through a scheme that she had created.

She's in jail now for the next 10 years.

We also had an employee uh within a component unit called a tax increment reinvestment zone.

Over the course of eight years, he stole $8.5 million, and he's now in jail, or he pled guilty, he'll be in jail soon.

Um, and so these are very real things that occur.

It doesn't happen as often in Houston as it does in other cities, but we wanted to build a tool that allowed us to find those irregular financial behaviors and go after them quickly.

And so that was if year one was a year of learning and reaction, year two was a year of implementation, right?

Of all the things that the Ernston Young analysis helped us identify as strengths and weaknesses and establishing priority uh across the city.

This gave us an opportunity to act on those things.

And so we did a whole bunch of things.

I'm happy to talk in detail about it later for y'all, but suffice it to say, we were able to reduce salary expenditures through having a controlled retirement event.

Basically, 32% of our workforce was eligible for retirement, which is very, very, very high, very dangerously high.

And uh we were able to incentivize a little over a thousand people to retire.

They were ready.

Um, and we basically gave them the nudge that they needed.

Um, and we were able to uh remove about 100 million dollars of spend uh across the entire city.

About 40 million of it was allocable to the general fund, and then we were able to cut about 122 million dollars of spending just through sort of the smart stuff that you would expect any organization to do.

For example, going back to the high water bill example, we had uh we have a 311 call center, so if y'all have potholes or if you have any any sort of challenge with the city with the exception of 911, you always call 311 except water bills.

We had our separate calling center, and you nobody here, I guarantee, not even the council members could tell me what that number is for the water bill calling center, and it was you'd call through one and get transferred to the center.

So we merged those two things, and so through doing stuff like that, we were able to reduce over the entire organization about 122 million to spend.

And so year one was learning, year two was implementation.

Now we're kind of in year three, and we are far enough away from being able to to tighten our belts and prove in a way that the theory was correct.

The hypothesis of Mayor Whitmire was correct as we came in that there was an ability for the city of Houston to tighten its own belt without passing that cost on immediately to Houstonians.

Uh, but we are now also close enough to a pretty significant fiscal cliff where we want to be able to react to it in a timely manner that allows us to be more flexible and establish a firm foundation in solving future budget challenges.

So the general fund outlook, I'm going to uh I'm gonna step away from the microphone and speak very, very loudly so y'all can all hear me in the back because I want to I want to van a white this a little bit for y'all.

So uh this is what we call our funds.

This is something that city city council insiders, city council members, okay.

I didn't realize I could do that.

Hey, there we go.

Okay, can y'all hear me still?

Okay, so this red line is representative of what we call our budget deficit, but more importantly from y'all's perspective, the city of Houston for the past like 30 years spends more money than it takes in in revenue in the general fund.

General fund again is the biggest fund that we have, but more importantly, at least by way of employees.

So this is how much money we spend over the revenue that we take in.

So we are what's called a deficit spending organization.

Almost all major cities are like this.

We could talk about the theory of it if you want to pull me to the side.

There's a logical reason for this, but it shouldn't be this severe or aggravated.

Um, so what you are looking at is the volume or the price value of the budget deficit, and then you are looking at the overtime.

So what fiscal years we have.

So this is fiscal year 30, about four years out.

So uh what we see within FY27, so this is the budget year that we're we're bringing up, we have a 209 million dollar budget gap.

FY28, we expect it to be 334.

FY29, it's gonna be 381.

FY30, it'll be 446.

Um, this is we have uh, you know, as said earlier, we've got a couple of folks from the controller's office, the controller's office, and us, we might nitpick on a couple of like uh I would say within percentage points, single-digit percentage points of what that value is gonna be, but generally we agree it's pretty severe.

So by FY30, we're expecting about a half a billion dollar budget deficit.

If we do nothing this fiscal year.

Um, but more importantly, we have uh the city of Houston because we deficit spend when you spend more than you take in in revenue, you have to draw down, you close your budget gap by pulling down from your savings account.

We call it fund balance, y'all would call it savings account.

State of Texas calls it their rainy day fund.

Uh so by FY27, we would dip below a very important number, which is the 7.5%.

So this is 7.5% of expenditures minus debt service minus pay as you go.

And that 7.5% has a lot of meaning.

The first one is that it is a requirement set by city council a handful of years ago, uh, that it is the bottom threshold that we have to keep in our savings account.

But more importantly, our ratings agencies.

So think uh like Moody's, SP, Fitch, they care about that number for the purposes of understanding what our debt is rated at.

So debt rating is an important thing in municipal world, basically says how stable is the debt for bondholders if they're gonna purchase City of Houston debt.

FY27, if we do nothing, our budget gap is 209 million dollars to close that gap, it would bring us below 7.5%.

So the practical effect, again, if we do nothing, is that we would dip below 7.5%, so that would mean that our debt would be downgraded.

So we are uh we're double A3 right now, and we'd be downgraded at least one notch.

And what that does is it does a simple thing, it just makes it more expensive for us to borrow money to purchase things.

So we would be spending, let's say the same amount of money, but we'd be getting fewer fire trucks and ambulances and cop cars and solid waste vehicles and park vehicles, and we were we'd be repairing fewer fire stations and police stations and libraries and park facilities, community centers type of stuff.

If we continue to do nothing by FY28, we go into negative cash balance.

So this is where people in my position begin looking at ways in which we can sort of cut off strategically cut off arms and legs of government where we're doing a whole bunch of outsourcing, but in effect, this is what we would call layoff territory.

City of Houston in 85% of our expenditure is salaries.

So we are by design, and this is not normal, this is not abnormal across.

I come from the private sector uh before I came to my Mayor Whitmeyer.

I consulted with cities across the U.S., this is a very standard thing.

Almost all cities are people cost.

And so this is by design, by necessity, we would have to effectively lay people off.

And that's if we do nothing.

So this is the most depressing part of the uh of the presentation.

I promise it only gets happier from here.

That's right, yeah, the biblical stuff, that's next.

That's next slide.

Hang on.

So uh what we're not doing.

There's a couple of things that Mayor Whitmeyer made very clear to us as staff members, um, as folks that that he charged with doing work like this.

And the first thing that he said is that uh because my hypothet I have my hypothesis that, and turns out to be true, that the city of Houston has the ability to reduce its own expenditures and can sort of look inside of itself and say, we are inefficient, we can fix ourselves.

There are things that we can do to modernize and align ourselves with sound business practices.

Um I'm not going to be raising taxes.

That's the last thing that I'm gonna do.

And raising taxes in our world means raising property tax.

That's the only lever that we really have with regard to taxation.

Second thing he said is the last thing that I want to do is lay off employees because those employees, city of Houston's been under a budget deficit for decades.

This isn't a Mayor Whitmeyer problem, it wasn't a Mayor Turner or a Mayor Parker or a Mayor Bill White.

This has been around for a very, very long time.

And the city has continued to shrink and shrink and shrink and shrink inside the general fund.

And every single year, the the number one conversation, and we've got a bunch of city employees in the back, and I encourage you to go talk to them and sort of hear their perspective on this, but every year it's 10% cuts and maybe layoffs, right?

That's the conversation every single year.

And so as we have sort of whittled down the general fund into just sort of bare bones type of things, we have to do something different.

But his perspective is I don't want to lay people off because I do think that the city of Houston could be more efficient.

So he said we're not raising property tax.

So what are we not doing?

We are not raising property taxes.

The tax rate will stay at 51 cents.

There's um some different disagreements publicly in debates about whether or not that's a sound decision.

It's the mayor's perspective on it that this is the last thing that he wants to do.

Um he will say, and this is a caveat uh that I'd like to give.

Uh, Mayor Whitmeyer has said the thing, and I actually believe him when he says this.

He's been an elected official for 52 years, his entire adult life, and he has said uh pretty funnily, that he's probably the in the state of Texas, he's voted to raise people's people's taxes more than anybody else alive in the state of Texas, and I kind of believe him on that.

But the point being that he's not necessarily opposed to a tax increase, but this isn't the right time for a lot of different reasons, but more importantly, we do think that we can find more efficiency within the government itself.

We are not expanding government programs.

So we have like a lot of big bold ideas of things that we'd like to accomplish.

We want to be able to build sidewalks across the city of Houston and communities that have never had them before.

We want to be able to do address, let's tackle food deserts and all these other challenges that we have.

But this is the year, and describing this as we establish fiscal stability in the city of Houston, if we describe it as building a home, this is the foundation year.

And we think that getting ahead of ourselves on expanding these types of programs before making it a sound fiscal platform, we're sort of cutting off our nose to spite our face with this.

We are not going to be relying on one-time transfers.

I have been a part of administrations.

Um I worked for Mayor Parker and Mayor Turner, in which we closed budget gaps with one-off land sales.

That is not something that we're going to be doing here.

Our budget deficit is going to be closed as best as we can, and then the rest will be pulled drawn down from fund balance.

And then more importantly, we're not deferring infrastructure obligations.

So what are we doing?

I'm going to talk at a very high level, and then I'm going to show you what at what these are, then I'm going to show you what this does to the general fund, and then I'm going to stop because I have like a billion slides here.

So, and I'd rather ask the questions, as I said earlier.

So we are doing two core things.

The first, we're going to do one A and one B.

So one A is that we are declaring solid waste and municipal utility.

You don't care where it says this in state law, but I'll tell you anyways, because you asked.

In fit chapter 1502 of the Texas government code, it says that solid waste can be a public utility.

The same way that we've already declared water and sewer a public utility.

If we controlled electricity, we could also declare electricity a public utility, but that is center point's job.

So we are declaring solid waste municipal utility, and that the only thing that that does is it plucks it up out of the general fund and it moves it over into the utility fund.

And so what that means is the general fund is where our budget deficit is.

So we are going to be able to free up about 117 million dollars inside of the general fund.

That's the total cost of the solid waste department by moving it into this.

One B is that we are establishing an administrative fee.

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

That is a study that we have done.

We've commissioned a third-party analysis.

By law, we have to do that before you can establish a fee.

And what they've said is that the total cost of solid waste is $25 per household per month.

It is the perspective of Mayor Whitmeyer that their Houstonians cannot tolerate a zero to $25 per household per month shift.

Going from zero to twenty-five isn't something that a lot of households in Houston or isn't something that a lot of the households that couldn't afford it would be able to tolerate, and we create a whole bunch of household shock.

So what we're doing is we are establishing a $5 administrative fee.

So when we divide, when we did our cost of study analysis to understand that $25 per household per month, $5 is what's allocated to the cost of administering the department itself.

So we are going to be doing a $5 administrative fee, and that is going to be pervasive for two years.

So for two fiscal years, it'll be $5 per household per month.

After that, the expectation is that city council with the mayor will vote on a $5 increase each fiscal year afterwards until it becomes the full cost of service for that.

So that means Houstonians will be on the hook for a $25 garbage fee by FY32.

A couple of caveats to that is one that could change.

This is going to be a policy decision.

This is a fiscal conversation.

The policymakers are going to talk about the policy stuff, and when I say that, I mean, do we provide carve outs for senior citizens?

Do we provide carve outs for low to moderate income households?

Do we establish a fund that says if you can't make your bill, you can draw down from this fund, kind of like we do our water bills.

So there's a whole bunch of policy conversations that need to occur.

This is a fiscal one.

The second thing, so that's one A and one B.

The second thing that we're doing is we are establishing what's called a right-of-way rental fee.

So this gets a little bit convoluted.

Um, this is one of those things that, you know, there's lies, damn lies in government.

So Chapter 1502 establishes the fact that utilities can pay to occupy the right-of-way.

It is a prerogative of cities to charge utilities that operate inside the right-of-way.

So right-of-way is our language for effectively curb to curve.

You hear about it.

So public city streets, whenever you hear what is the road public or private, public means it is a right-of-way, a public right-of-way.

It means that it's every owned by everybody.

And when it's owned by everybody, the general fund is the responsible party for that.

So whenever people pay to occupy the right-of-way, so for example, Center Point having all of their electricity poles on our sidewalks and all the natural gas lines underneath, they are a utility that charges for bus charges for their business.

They pay the City of Houston General Fund to occupy the right-of-way to charge for that business.

What they're providing to you.

And so there are other utilities that have made that you hear about Center Point, ATT, right?

They lay fiber underneath the roads here.

Well, other cities across the state of Texas have required in the past, have required their have required their water and their sewer utilities to make those right-of-way payments, because what it is very normal and typical for water and sewer utilities to be squared off into their own enterprise fund.

Again, talking about a business, it's a fee service.

And so our water and utility does not pay that same right-of-way fee that Dallas Water, Austin Water, San Antonio Water, Fort Worth, El Paso, all of these other utilities that are controlled by those municipalities, they pay into that as well.

Ours never has.

There's memos that we found going back 25 years where it was a legal opinion as well as an uh um like an administrative opinion that we should be doing this, and it is a normal thing that other cities do, and we are actively hurting the general fund by not doing that because it is allowable under state law.

And we just never did it.

Don't know why.

I can't point back to those years in any sort of sound policy or memo to show that.

So what we are doing is we are turning that on.

We are saying that the city of Houston's water and sewer utility is going to be responsible for paying what is called a 5% gross revenue right-of-way rental transfer.

So that means they're gonna, of all the revenue that that water and sewer utility receives in one year, 5% of that is going to be transferred over into the general fund.

So to catch all up of where we're where we are right now, we are declaring solid waste of municipal utility.

So we're moving about 117 million dollars from the general fund over into the utility, and that will free up about 117 from the general fund in just sort of head space.

Then we are requiring the water and sewer utility to be responsible for the right-of-way that it occupies at 5% of gross revenues, which is about 104 million dollars.

And so that 104 million dollar revenue will then go into the general fund.

So we will have a net improvement inside of the general fund, which is what carries the budget deficit of about 220 million bucks.

And so the question that I would ask if I were y'all is okay, so what does that do?

Let me get to the last slide and then you see how many slides I have in between where I was and where I'm going.

Uh so what does this do for the general fund?

I'm gonna analyze this again.

So this is a new version of the first one that you saw.

It's a little bit more busy, so I'll take the time to describe it, but we've got the red line, which you're used to, the red line.

The green line is representative of the readjusted budget gap.

So the budget deficit that we've been carrying, it's now adjusted downward.

You'll see pretty significant downward adjustments, which is a great thing, but it doesn't solve our problem.

This is not a victory lap type of budget.

This isn't a mission accomplished type of budget.

We still have a ton of work to do.

But earlier on, when I said that fiscal stability is if we're to talk about it like it's a house, this is laying the foundation.

This is a very foundational year for us.

And so in FY27, if you remember, we were looking at dipping below 7.5% fund balance, we preserve a healthy fund balance of over 12%.

In FY28, where we were talking about going negative cash, we we preserve still the fund balance above 7.5%.

And where we were projecting a $209 million budget gap, we're readjusting it down to $25 million.

Where we were projecting a $334 million budget gap for FY28, where we were going to go negative cash, it's now readjusted to $92.

So there's a lot of improvement that we're seeing, but as you can see out here in FY29 and FY30 out years, we're still projected to go down below that 7.5%.

Which is why I say that this isn't like a mission accomplished or victory budget.

We still have a ton of work to do, and we're working on those things, but what this gets us is time and predictable behavior out of our revenue streams and our expenditures.

As I told you earlier, the largest cost that the city of Houston bears is its employees, 85% roughly.

And so what that means is that in the future, as we understand the organization more, as we dig more into how many widgets does Steven do in a day.

If I'm a if I work in public works and I do uh snaking of sewer pipes, so using a big long cable that's technically we call it TVing, but it's a television that goes into the sewer lines and looks for what's broken.

As we improve efficiency, where we thought we would need 20 of those guys, maybe we need 15.

And as the five naturally a trip, we make those positions go away.

And so as we improve our internal processes, we're able to reduce future costs through attrition and then also through, you know, just sound expenditure reductions.

But of the, I would say the 10 very serious things that we're looking at.

There's like ideas that people have, and then there's like the serious stuff that we can dig in on.

I would say about half our expenditure reduction, half a revenue increasing.

And so I do think that, and I don't know if it's gonna be in the next two years, in the next five years.

Maybe it is, maybe it isn't, but I think there's gonna be a serious conversation that the elected officials of the city of Houston, which I am not, uh, the elected officials are gonna have to have with the the taxpayers and the fee payers and the the rate payers of the city of Houston to say what type of government do you want to have?

Because what we've what we're seeing is a consistent pressure on things like parks and libraries.

I'll tell you, I mean, I'm the one that has to like be a part of solving this problem.

The way that I minimize costs in the library department is I shorten the amount of hours they're opening.

There are libraries, I'm not kidding, and there are council members in this room who that it sits in their district.

There are libraries that receive fewer than a hundred people a year stepping into that library.

By any measure, any measure in any private business, you would shut that down.

But we're the we're public sector, we're the government libraries, I think are beacons.

All of our libraries should be castles, and I don't think anyone here disagrees, but we have to be able to say we need to eat that cost.

And the way that we have been eating that cost, because there's been so much pressure in the general fund is we say, yeah, we're gonna cut Fridays.

Friday the library won't be open.

We're gonna shorten the hours to only six hours a day.

Parks, same thing.

We're gonna we're gonna the really easy lever that we pull is we're saying instead of mowing parks on a 14-day mowing schedule, we'll do 21 days or 28 days.

And so instead of mowing parks every week, every two weeks, we're mowing them once a month.

And so when you go to a park with your kids, you're gonna see weeds this high, and that's a normal thing that's by design, so we can make sure that we balance our budget, balance our budget.

So these are hard conversations.

I'm not for one second gonna say that anything around this is easy.

Um, and that's where I think the important thing is is that we all sort of meet the moment and we're trying to say there's a way in which we think that the city of Houston can extract more money from itself, and there's ways that we can make sure that the user has a soft entry into a new fee.

Garbage fees, city of Houston is literally quite literally the only city in the state of Texas that does not have a garbage fee.

If you live in the city of Houston, or if you live on acreage in which you burn your trash, you don't pay a garbage fee.

Everywhere else in the state of Texas you do.

And so the conversation is if that's the way that it is, if that's the way that the world works and the city of Houston's choosing to do not that, um, what type of pressure are we putting on our libraries, on our parks, on our health department, on our corporate functions, right?

One of the important most important things that we do uh is um like um accounts receivable, accounts payable.

We charge people for stuff, and people charge us for stuff and do that work back and forth.

If we don't have sound business principles around those things, we are leaving money on the table.

We're causing our uh arrears to grow and grow and grow, and we're not collecting on certain things.

So there's a whole uh I got really deep.

Sorry, I'm getting real deep real fast.

Okay, so having said that, this is what this does, the two act the two things that we're doing.

So I'm gonna stop talking and answer any questions that y'all might have.

It looks like there's a microphone set up in the middle, so I think it's you're gonna be encouraged to stand up to it and ask a question.

Y'all have got me here.

Ask the hard ones.

Come on.

Microphone.

Stand up by the mic.

Look at the line.

Oh, the cue.

Oh, here we go.

Russell.

Check.

All right.

So this works.

Uh, thank you for the presentation and thanks for taking time out of uh I know a government getting a government employee to come out on a Saturday is uh as a former government bureaucrat myself.

I I respect it.

Thank you very much.

Uh I understand that the right-of-way fee and the garbage fee are being introduced and they're at flat rates, but is there any way, is there any consideration from the administration to consider scaling that based on usage?

So, for example, a block, a dense neighborhood in Montrose paying five dollars a flat fee per resident.

Kind of seems unfair considering that garbage trucks have to go further and further out.

Same with ride-away utility fees.

You know, larger suburban areas are gonna be eating up a lot more of our infrastructure and our little sprawled out compared to the denser areas that are comparatively quicker and easier to serve.

So is there any way to kind of scale that either with density or with uh utility usage, etc.

Yeah, that's a really thoughtful question.

So I'm gonna answer it in in the two two sections.

So the first one is is solid waste.

We are, as I said earlier, and sometimes I get a little bit wrapped up that I stare at this and can't see the forest for the trees.

This is a what for solid waste, this is a fiscal maneuver.

Yeah, right.

Um I don't think anybody sees it in any other way than that.

We are in the process of deconstruct deconstructing the solid waste department and the operations that they do.

We are under no illusion that it is an inefficient function.

It has been that way for about 25 years.

And the thing the two drivers of the inefficiency within the department is the aging fleet.

So where you would expect a solid waste vehicle, so these are the sidearm loaders.

Useful life is seven years and about two hundred and fifty thousand miles.

Average age right now is ten years and like four hundred and fifty thousand miles.

A different way to put it is where uh so we care about cities for the purposes of talking about departments like Solid Waste, we care about comparable cities with sprawl because they have to drive more.

Chicago is not a comparable city for solid waste service to us because they're a vertical city.

Yeah, so uh solid waste in Phoenix and LA are great proxies for us.

And so our department director actually just went out there to Phoenix um to be able to talk to them and understand where solid waste services uh trucks in uh Phoenix and LA are breaking down on five to ten uh trucks per day on average, we're at 40 and 45.

We have a that's a quarter of our fleet, so a quarter of our fleet breaks down every day.

Right.

And so that is years and years of neglect.

And so there is absolutely a look at the way in which we can improve efficiency, but B, how do we change the trash program to meet things?

Pay as you throw is what you referenced.

That's what a lot of other cities do.

So for example, um, City of Austin I think is anywhere between thirty and sixty-five dollars per household per month.

If you are a single person inside of a household and you just need like half a can a week, you pay less than someone who's maybe got six people inside their household.

I think the challenge, and this is the feedback that we have been hearing.

I know that the controller and his staff have been hearing it at uh hearing it at their town halls, is that garbage fees, garbage fees in any scenario tend to kind of be regressive, right?

You you tend to find that um it now it's a use fee, right?

So you use the service, you pay for it.

Um pay as you throw can create problems, especially when you create a higher window.

So $65 in Austin, it's already expensive to live in Austin.

Um in Dallas, their flat fee is forty bucks.

You know, and that's one of the reasons why we were super comfortable coming in with five.

Um but over the next few years, as we improve the department itself, we fully expect council to make that determination of what type of service do we want to provide.

As we find efficiency in the department, I think one of the first questions that we're gonna be asked that I think it's incumbent upon Solid Waste to consider is if we go from uh, let's say $25, but through operational efficiency, we actually decrease it to like $21.

Uh, what is the cost of adding an extra garbage day in the week?

So we do two days per week instead of one.

So I think there's a lot of those questions up in play.

It's absolutely consider we considered it a hundred percent.

Um, but for the purposes of the next couple of years, we wanted to focus on a low fee that you didn't ask this question, but what that fee represents is about 24 million dollars of income per year.

Yeah, the controller is right that that doesn't fully pay for the service because math maths.

But the uh the five dollars, what that establishes is what's called a revenue stream, and then we can issue debt against new revenue.

So we're gonna call it a revenue bond.

So all those trucks that I was talking about, we're gonna purchase more trucks.

We have five transfer stations across the city of Houston.

So if this is your neighborhood and this is your truck and this is a transfer station, I get all my trash here and I go to the transfer station, drop it off, go back, get more, drop it off.

And at the transfer station, we have folks folks packaging up the trash and then going over to a landfill on our behalf.

Um, of the five that we have in the city, two work.

So if you live north of I-10, if you live north of I-10, your trash guys are having to drive like an hour south every trip, and then an hour north back up to those communities every trip.

And so it creates these like all these downstream impacts.

So, that was a very long rambly answer to your question.

No, I appreciate it, yes.

Yeah, that's part one.

Part two is.

You asked about the right-of-way fee.

So there's two, I'll do this one real fast, Sally.

Uh there are uh two ways to calculate right-of-way fee.

You do linear feet of occupancy.

Um, so for example, it's very easy to count how many linear feet of telephone polls or telephone wires there are of electricity wires.

Uh, but for utilities like electricity, they can also measure by the widget.

So we actually charge as per kilowatt hour for electricity, and then for natural gas, we charge per linear foot.

The important thing here, and this is maybe a little bit of a dirty secret, you st and all cities are like this, but um cities largely are now moving in the past 20 30 years of digitizing their documents.

So uh we have a hundred and fifty years of paper information about where our pipes are.

And Houston, we we have a bell curve of like what our pipes look like, and on the the short end it's brand new pipes, but on the long tail, we're seeing pipes from the late 1800s, early 1900s, and we're talking about like petrified wood pipes, and the question becomes do we trust what we believe where our pipes are?

If we are establishing a rule set of saying per linear feet, this is the amount of we're gonna charge you per pipe.

Well, when we dig up uh a street to fix it and we find out, oh, there was an additional two thousand linear feet of petrified wood pipe that we didn't know was there, we've been undercharging the utility.

So, what all cities across the state have chosen to do is a percentage of gross revenues.

Got it.

Thank you.

So there are a few things that you said that frankly don't make sense to me.

So you said Mayor Whitmeyer is committed to no increase in property taxes, but we know that controller Hollins, for example, has said that without exceeding the property tax cap, the city could collect at least another 20 million dollars per year.

And this administration is refusing to even talk about that.

And yet you're also saying there's not going to be any increased deferred maintenance of infrastructure, even while we take another 104 million dollars from water and sewer for this right-of-way fee.

How can you take further money away from water and sewer?

We have a huge backlog of drainage projects, for example.

We have water leaks, we have lead poisoning.

You're taking more money from water and sewer, and then claiming there won't be any further deferred maintenance of infrastructure without even collecting the limit of our property tax cap.

How is that possible?

That makes no sense.

Thanks for the question.

Uh, a couple of things I'm gonna clarify.

Uh one, lead poisoning is not really a thing inside of our water system.

Um, so that that is a uh sort of a challenge.

We absolutely have to address lead pipes, but lead poisoning is something that you would hear a ton more about.

Um one thing that I will say is that uh I've got two slides for that.

Uh so uh the combined utility system looks at two different things.

You are about to get a super finance bro, uh answer out of me, and I apologize ahead of time, but you asked a question that was detailed and a little bit loaded, so I'm gonna answer it.

Um the combined utility system looks at two different things.

One is called the debt service coverage ratio.

So if we carry a hundred dollars of debt, our debt holders expect us to carry at a maximum a hundred and thirty-five dollars of coverage.

So that means for every one hundred dollars we carry in debt, we need to make sure that we have a hundred and thirty-five in the bank.

So that would be uh debt service coverage ratio of a hundred and thirty five percent or one point three five times.

We currently carry within our system two hundred and fifteen percent coverage, meaning we are carrying a whole bunch of liquidity above what we are required to carry.

And now, whether or not you agree with a right-of-way transfer or you know, doing more projects or whatever, I'm not sure the position you're taking.

I think that we could both agree that that's carrying too much.

We're carrying more than we should for debt coverage, and that means we're not putting more money into whatever we need the system to do.

That's one.

Two is we have what's called required cash reserves.

So this is based on that's the debt side.

This is now the operation side.

We have to carry a certain amount of operational cash.

And that means if every ratepayer stopped paying today, how long could our system run without any more money?

By ordinance, we're required to keep 60 days, but the public works department very wisely, uh along with the uh the ratings agencies, have said the cash policy needs to be bumped up and to carry 300 days.

We are currently carrying 550 days of operational reserves.

Going back to the comment I made earlier, you and I can disagree on what the money should be doing, but we should agree that there is too much money being carried and not being activated, right?

So do you agree with that?

I don't see how this adds up to non-deferred payments.

I'm sure we're getting you there.

So what you'll see here is a very historical look.

This is uh this is our ending balance.

We don't call it fund balance because fund implies savings.

This is technically programmed money.

Um so we have this is the amount of money that we have carrying inside uh inside of our ending balance, and then this is the amount of money that we carry over time.

There's a whole bunch of things I'm about to throw at you, and I'd like you to ask questions about it, but you'll see here that it's generally pretty flat between this time and 2021.

So this is where we're carrying about seven anywhere between 700 to 805 million dollars per year in ending balance inside the combined utility system.

There's a lot of reasons for that, but there's a lot of policies that we sort of inherently disagree with that I'd inherently disagree with as a Stephen person, and uh as a Stephen person, and uh the department changed policy, uh a lot of policies under the previous administration to to address this in particular.

So, number one, it has been the historical practice of the department to say whenever we're gonna pay for a project.

So let's just say we're gonna do like um a $35 million project in Northeast and we're gonna impact drainage for whatever reason.

Um they would appropriate cash, all of the cash up front.

It doesn't become a milestone appropriation, it becomes they just lock up all the cash, excuse me.

They lock up all the cash, encumber the cash inside of this fund.

So what that means is we know one of the most predictable rate bases inside of the city of Houston, besides our taxpayers or our rate payers for water and sewer.

We can predict it out pretty accurately, and they do.

And so what we see is that there was a policy in place prior to this that year, in which they said we're gonna lock up every single ounce of dollar, even though we know it's gonna be replenished in upcoming years for that project.

And all of our projects include design work, and then you go into construction, and then construction spans over multiple years.

And we tend to get eight, ten, twelve year projects inside this fund.

And so they would they were locking up 12 years of work's worth of money in year one, and they were saying can't do it, even though it was going to be replenished and we knew it would be.

And so that's where part of this spike comes from because what you see between 21 and 22 is we jump from about 800 to a little under 1.2 billion inside of carrying that ending balance.

Additionally, we saw under Carol Haddock as director and Randy Mackey, who's the director now, but he was chief operating officer under Carroll.

What we saw was this huge investment internally into improving things.

And so there was there uh you improved work order systems, you drove performance metrics.

This is right around the time that uh what's called outcome-based budgeting.

This is basically putting performance metrics next to the funding source, and say if you don't meet these thresholds, how do we we need to have a conversation about whether you meet those or not?

It was a whole bunch of work that was done, and it drove down the cost of doing the work itself in the department.

And then the third policy change that happened right around here inside this particular gap, this increase, was uh that the city of Houston uh decided to um look at a couple of other metrics when replacing specifically our water pipes.

Y'all have all heard that we leak, right?

I I don't know if you'll have, I know that there's some no new Houstonians here.

Um we leak about on average or leaked when we came in 38 billion gallons of water per year.

And that then that is a good proxy is Fort Worth consumes less than that in a year, just normally.

So we had a very leaky set of pipes.

Well, we had this distribution curve that looked like this, and in the middle of that curve was the average age of the pipe.

And we use that largely to make the determination of the replacement cycle.

Any we go anywhere between one, two, and three percent right now.

The public works department replaces three percent of the pipes in our system each year.

That's the goal that we set for ourselves, and we actually meet that goal.

Um, back then at this point, I think it was two or two and a half, and historically it's been one to two, uh, depending on the director.

Uh largely what determined the pipe replacement schedule was the age of the pipe, which is a pretty good metric.

I'm not gonna lie, that's like it's not terrible because again, going back to my comment, we have late 1800 pipes, the petrified wood type of stuff across the city of Houston.

City of Houston's a very old city, just like all cities are, and they have to do that.

Um, what we chose during this year was to go after not just just use the age of the pipe, also the leakiness of the pipe.

So that 3% became largely the leaky pipes that we're replacing.

And that created not an impact that that created um an operational impact.

When you repair the leaky pipe, you don't have to repair the leak anymore.

And so it created this sort of surge right here in this fiscal year.

And then it levels out a little bit, and then we get into office in this area, and that's when you see it tick up a little bit more.

And what that was was that was us determining that we wanted to do a thing, we wanted to change a policy that the department had had historically that the department had historically, where they would um, I don't want to phrase this, they would choose cash over finding a diversified revenue source or fund project funding stream.

So largely, we like I said, where we locked up cash on the front end for the entire purpose of the year, where we it was sort of easy and convenient for us to go and get uh partner up with the state or the federal government to do the work.

We would um but we leaned harder into it, and part of the reason why we leaned harder into it was because in 23 and 25, the state of Texas opened up a whole bunch of different project funding streams.

One of them is the Texas Water Development Board, the other one is the uh the federal government, it's called Withia Loans, but that stands for the Water Infrastructure Act.

And what they said is that we will give you loans for improvements, capital improvements that are cheaper than the debt that you can get yourself.

And more importantly, they opened up streams in which there would be 0% interest.

So we're actually bringing Samir, I think we're bringing it next week or the week after to City Council.

There's gonna be like a $50 million loan that we get from the Texas Water Development Board for 0% interest.

It's effectively free money in our world, right?

We're planning on spending it anyways, but now we're borrowing it for free.

So all of those things created head space.

Now, is all of that money uh money that we can just chew up and put into the general fund?

Absolutely not.

We're not saying that it is.

But when you s when you hear that, you know, we're we're robbing Peter to pay Paul, we're not.

There's two sides to this conversation.

One is what the state allows for, and the state says it is a perfectly lawful thing to do it.

But that doesn't take that doesn't answer the question of whether we should.

And the answer, I believe, and this is the way that Mayor Whitmire feels, and it's the way that we're having the conversation with the public as well as with city council, is that through sound policy decision making and accounting principle changes over the past, not just Mayor Whitmeyer's administration, but I would also say Mayor Turner's, is we have been able to build efficiency into the department in which it can afford the 5%.

And so that's the reason why we chose to come in this year.

One of the one of the comments that I heard, and it was sort of a cheap shot, but whatever, I get it, um, was well, if it's such a good idea, why don't you do it in year one?

I would argue that we couldn't have done it in year one.

Because we were still working, like, yes, there was a lot of good work that was done within this year, but really it was about diversifying our project funding sources.

We've been driving efficiency into the departments, we've been doing all these things, and so that's where we talk about the head space that we get.

And we can argue, I think that we could argue uh reasonably, whether or not we think that it is a good idea for this to happen forever, for it to go above five percent to do all these things, but what what we're trying to balance out is that there is a I don't think that a regular Houstonian says, I care, I I see the difference between paying my permit, between paying my taxes, and between paying my water bill.

They just know that they've paid the city of Houston.

This was unutilized capital that we created permanent space for within by doing just policy changes and operational changes and operational improvements.

And we're also, while we have this, we are also having the concurrent conversation of shutting down parks and libraries and increasing mowing cycles and having all these issues.

And so what we believe that this fiscal year represents is a balance.

Not saying we're going in 100% on it.

I think I've heard a couple of folks say, well, why not do $25 all at the once?

And Mayor Whitmeyer doesn't agree with that, but I I think that we're striking balance with this budget cycle.

And so I'm happy to talk to you the side.

I don't know if you look behind there's the long line, but I'm happy to talk to you about this more.

Hi.

Thanks for the presentation.

My uh first, I have a question and then a comment.

Where exactly will the $5 administrative fee plus any additional fees go?

Which bucket are those going to?

So good question.

So the the $5 fee by design, because we're declaring it uh utility, sits inside the utility.

In the C US.

Yeah, it will be in the C US because solid waste is part of the combined utility system at that point.

So it becomes effectively a lockbox, unless allowed under state law, right?

Um, it where it will show up is on your water bill, although it is not part of your water rates.

So right now you'll see a container lease fee.

It's like $1.27.

It'll sit inside that same side same line item and it'll become six dollars and 27 cents.

And then on the um right-of-way fee, my concern is that a right-of-way fee will go on eventually and increased rates for ratepayers.

And I think in this kind of balanced conversation you're talking about expanding revenue, we need to think about least the least regressive ways to collect revenue, a trash fee and an increase in water fee or rates or sewer rates, impact the people who are already paying the largest percentage of their income to just living expenses.

So a property tax, I know our property tax value or uh rate has gone down over the last number of years.

Um so I think people that's it's it's still regressive, but it's a least regressive measure.

So I think we should consider balancing that.

I don't disagree with you.

And I think that that's the conversation we fully expect city council to continue to have.

I'll tell you, and this is the the last comment, and then we'll go to the next one.

Um by the way, thank you for that.

Um but the the thing that it is I would say is that every city that we benchmarked, we didn't just look at what costs are across the state of Texas.

What we also looked at um was uh what discounts they provide.

So this is a good look at solid waste fees across the state.

The lowest is Fort Worth at $14 a month, highest is Austin again at $65 a month.

It sort of varies where you see that there's a range that usually means pay as you throw, where it's a flat fee, it's a flat fee service.

Um the important thing is that we also deconstructed all of the discounts they provide.

So low to moderate income families, seniors, presence of a disability, and whether or not there's a discount.

None of them come at five.

Not even close.

The closest one is like ten or eleven.

So we felt comfortable in saying five dollars is a lot for a lot of families in Houston, but it is five dollars and comparatively to literally everywhere else in the state of Texas and everywhere in this region, there's nothing that compares to it, and we know that we have to improve that service first, which is the other reason why we decided to go to five instead of twenty-five.

Thank you.

Thank you for your question and comment.

I'm gonna try to make this real quick.

My name's Bob Fleming, I'm I'm with the Metropolitan Organization, Houston or Coalition of Churches.

Uh I think you answered my question.

So I'm gonna try to some uh summarize your answer.

Maybe you could answer in a minute or so whether we've got it right.

The audience is putting timers on me.

I love it.

Um so the right-of-way fee that that moves dollars into the city budget creates obviously a problem for the business that we call the combined utility system.

It put uh the the cost that they pay in millions of dollars is only partially compensated by the garbage fee.

If I understood your answer as to what to do with that business that re that deficit the results to the C US is you're telling us that the reserves are overfunded.

The first reserve is the is the debt reserve to pay debts.

I think you said a hundred and thirty-five to thirty, and the other reserve that's overfunded is the operating reserve for daily operations.

And so the answer is that you tend to you're going to uh reduce this deficit cause by the right-of-way fund by bringing your reserves down that are overfunded to partially compensate for that loss.

The $24 million in garbage fees that comes to you helps compensate for that.

If that were not to be fully compensated by adjusting the reserves and taking the five dollar garbage fee, then and only then would you have to pass on increases of rates.

So water consumers.

Is that is that an accurate summary of what you're doing?

I want to wheel you out and like, yeah, that's it, man.

Okay.

So we're we can hold you to that then.

The last thing that would happen uh would be an increase in water fees because you think the garbage fee and the over uh uh funded reserves would take care of this deficit you've caused by moving right-of-way fees into the general budget.

So I'm gonna give you a yes and to that.

So yes and uh, one of the things is we've done the modeling um in a lot of different ways.

We modeled not just five percent, but what is seven and a half percent, what is nine, what is ten percent look like?

We don't want to go up that high.

Um we still see and project an increase in fund balance, and the reason why is because the department is just doing things more efficiently.

The thing that I'm gonna say here, and this is uh I uh You're you're getting past your minute now, be careful.

I haven't even hit 20 seconds, dude.

Uh so with whenever uh one of the important things that everyone talks about is the combined utility systems uh consent decree with the EPA.

When that was passed, there was also a rate study that was passed at the same time.

And what that rate study necessarily looks at is it says what is the cost of the debt that we have to cover, what is the cost of the opex that we have to cover, what is the cost of the um consent decree.

But when we look at what is the cost of operations, by design, it has to assume that the operations are efficient at that point in time.

Since 2021, by design, and you can kind of see it in the math, the department has become more efficient.

And so there are people who are saying, you know, we're being overcharged.

If there's that much head space, you're being you're overcharging us on our fee.

I think it's more of like a positive story to say that the department's doing better about being able to drive more cost into it.

So so I'll amend my answer.

Your your your suggestion is you'll you'll cut this deficit by uh by the garbage fee, by the uh by bringing the oversubscribed reserves into line and by increased efficiency.

Yes.

You'll do all of those things before the water rate would have to go up for payers.

Thank you.

Thank you, sir.

Oh well, I guess I'll just bend over here.

There we go.

Uh, the problem that I have.

I had a so this all kind of I have two like a two-parter uh this all sounds well and good, but when I pull up the FY27, like combined utility systems budget, it looks like the fund balance starts at like one and a half billion and ends at like one point two seven billion.

It seems like there's a two hundred million dollar hit, two hundred plus million dollar hit to that budget that's pretty much aligns with this right-of-way service fee charge and the garbage service being under the combined utility system.

And it feels like if we don't do anything, it's gonna keep getting worse until it you know runs out that budget.

My question would be is do we have a plan to like close that?

It feels like we're just pushing the two hundred million dollar deficit from the general fund to the utility service, and we're not actually solving this deficit.

It feels like we're just moving money around to like buy time.

And my second question is is the police are adding a hundred million dollars of cost every single year, and we don't even sound like we're having them in this conversation.

Like we're talking about closing down libraries, we're talking about like mowing changes.

You could shut down the entire library budget and you wouldn't cover one year's worth of police increases.

Are we even talking to them?

Are we even like including them in the conversation on how we're gonna balance this budget?

Because I feel like they're a huge elephant in the room that we're just kind of ignoring and like sleepwalking into like a fiscal cliff.

So I just wondering like, are we doing anything?

Because like police and like library, all the cultural services are only 250-ish million dollars, something in that range.

So it's like you can't really balance it if you if you're not if you're ignoring the other 75% of the general fund.

You know what I'm saying?

Yeah, I do, I hear what you're saying.

So one, uh I'll answer your question about the C US.

Yes, we are working towards that.

It does match it, but also decreases in fund balance within the enterprise fund is that we are doing projects within the combined utility system.

So it it's representative of both.

I'll also say that the solid waste is expected, the solid waste subsidy is expected to be temporary and diminishing, um, by design.

So you're absolutely right to be able to call out, and I think that other uh folks who have said this publicly is you know, they're you're utilizing uh ending balance to subsidize the cost of solid waste, and the answer is yeah, because the mayor doesn't believe that we should pass on 25 dollars like this to a household.

And I think that uh you know I've heard a bunch of arguments to say that you know people can't afford five dollars.

Well, they can't afford twenty-five either, if that's the argument.

And so the the premise here is that as a temporary measure, the ending balance of the of the combined utility system will temporarily uh subsidize the cost of solid waste service as we measurably and predictably increase it to the user.

And within the next five years, the expectation is that they would get to 25.

But again, Mayor Whitmeyer's made the commitment that that's gonna be a discussion had by council members and the mayor and voted on.

So Houstonians have that predictability and the ability to give their input.

One.

Two is we absolutely have conversations.

I have conversations every day with the police chief and the fire chief about expenditures that happen.

This is not necessarily a way in which I would frame it in any other way, except for answering your question, is the state law, state law has very strong opinions about what we can or can't do with budgets for public safety.

In fact, if we were to cut the cost of the police department, we would actually lose out on the ability to collect sales tax.

And that's state law.

That is something that we are fully preempted on.

Now, I think the articulate answer to it is well, why couldn't we keep them flat?

Why couldn't we do all these things?

Well, when we came into office, there were a whole bunch of things that were real at the time, is occurring.

So all of the stuff that you just talked about with all of our cultural services style functions, right?

We've we've seen compression inside the general fund.

More importantly, we were at a net negative loss of police officers and a net negative loss with firefighters, and then the firefighter one was a little bit more complicated because we had an open lawsuit and uh no union contract in place.

And so, do I wish that we could have done all the efficiency stuff and started with something like this ahead of time?

Yeah, sure, of course.

But we had a judge telling us on the firefighter side that if we did not do something now with the fire department lawsuit, they were she was going to a rule in favor of the fire department.

And the liability at the time was 1.3 billion dollars.

Like cash payment.

You know, a lot of people have said that you know that $650 payout was a gimme.

Well, the courts had signaled to us 1.2 to 1.3 if we didn't settle.

So, right out of the gate, and this is not something that we run as a victory lap, but like we were able to reduce net cost by like $700 million just for the settlement of the lawsuit itself.

And that dealt with back pay, uh, right?

But more importantly, we don't get to just delay union contract negotiation uh just because we want to, because it's not the right time.

It just so happened that police and fire had to be negotiated at that point in time.

And there was a big concern, there still is a big concern that we were hemorrhaging police officers to other cities and we weren't filling our cadet classes.

Both of those things were true, and we were seeing net negatives in the police department.

Now there are folks that absolutely will say, fine, that's a good thing.

Let's put our money towards other things.

That is not the perspective of the mayor.

And I fully appreciate the fact that people can disagree with that.

But we had to deal with the things that were in front of us, which was the settlement for the firefighter, firefighter lawsuit, which also folded itself into negotiating the contract with the firefighters and then immediately turning around and having to negotiate with the police officers as well.

Um, and both of those things, pay raises cost money, right?

Those are the biggest employers it's the biggest employee block that we have.

And we could nitpick and say, well, you should have negotiated harder, and the fortunate thing is that, and I'm not meaning this with any disrespect at all, but that is a wonderful position to have for someone on the outside.

Right?

I sat across from the fire and fighters and the police officers and negotiated with them.

And what we were able, what they were able to prove to us, and I think in a very compelling way, was that folks would go through HPD cadet class.

HPD cadet class in the state of Texas is considered the single best cadet training class.

Not because they're teaching them how to fire guns and you know tackle people and headlocks and all the things that people think cops do, but because of de-escalation techniques that they teach.

It's got one of the strongest anger management and mental health resource component to it.

There are weeks and weeks and weeks of mental how to spot mental health challenges out of someone.

Someone in crisis, we call it crisis intervention within the police world.

And what people do is they qualify for our cadet class, go through our cadet classes, become a real cop and go off somewhere else, make more money and go somewhere else, usually to Austin, sometimes to Dallas, but a lot of times Harris County Commission or Constable Precincts.

And so we it costs money to train those folks.

I mean, we're spending like 700, 750,000 per cadet to train them.

These classes are super expensive, and and it's not like raw cash cost.

I heard a whistle over there.

It's not raw cash cost, it's like the cost of staff time and all those things to do it.

So I don't disagree with you, man.

Like we are we are not doing this, this butt FY27 budget and saying everything's great, we're going off, right?

We're still monitoring.

I told you at the beginning, this is a work in progress, and this is not a mission accomplished type of thing, but we've got to start somewhere.

And do I wish that we had you know different deadlines, the first things that we had to deal with where they were the biggest big dollar things?

Well, yeah, of course.

I wish I would have been able to do this first, tackle these things first.

But the important thing is that we are now net positive in police officers, we are net positive in firefighters, and we are seeing decreases in response times.

We're seeing improvements to what's called a brownout.

Um so ambulances under, and this is I've got to say this because you gotta say it, but right, the previous administration was plagued with brownouts in the fire department.

We're talking about communities in District I and District D and District B, all across the city of Houston, where there were ambulances we're saying, yeah, we're gonna push these 15 ambulances and not run them today, because we don't have the people to run them.

And response times creeped up, and that's a real thing.

And I'm not saying that I'm trying to change your mind about it, but it isn't that it's as simple as I've been heard it recently being framed about working and navigating these challenges.

Again, going back to the comment that we try to strike a balance.

Thank you for your question, man.

I appreciate that a lot.

Yeah.

Can I follow up?

Okay, you answered the trash fee covering itself, but the right-of-way fee doesn't seem to cover itself.

Well, I go back to this second ago.

The headspace that we've created.

Because the trash fee itself, I agree with you.

The math doesn't math if we carried a permanent subsidy for solid waste.

I agree with you completely.

Right, but the the fee, like forget solid, like if there's still 200 million drop.

Yeah, yeah, yeah.

100 million is a trash fee.

What about the other hundred million dollars?

It's part and parcel of the same thing.

It's coming from the the money is coming from the same pot.

So that the reason why the solid waste fee is subsidized is because it needs to be so we're not impacting homes, but it is a temporary subsidy.

The 5% right-of-way fee is going to be 104 million bucks, and then as we get more users, it would grow with the revenue that grows within it.

That is the permanent thing inside this fund, and that fund can carry that permanent thing.

We've created the operational headspace for ourselves, and we're smarter with the way in which we do the accounting inside of it.

The one that you're talking about, the subsidy, I think the subsidy makes sense to you, but the subsidy is the one that by design cannot last forever.

What can last forever is the five percent.

That's actually baked in, is that's an easier thing to math through.

So the the that's the reason why we put a time bound on the solid waste subsidy.

But there's a bigger hit to the fund.

There's there's over 200%.

So the 5%?

No.

The 5%'s 104 million dollars.

The cost of the solid waste department is going into that and going into uh the utility system is 117 million.

The size of the solid waste department?

No.

Solid waste is 117.

It's 107 plus debt service cost.

I'm happy to pull you to the side, sure.

I think we're almost there.

Like 95% of the way there.

Hi.

Uh sorry, I'm asking another question about the police budget.

Um love to hear that we're net positive on hiring police.

I think that's great.

Um, but if anyone else is driven around Houston in their lifetimes, uh traffic law is basically completely unenforced.

And I know that traffic ticket revenue is not a long-term solution to this, but are we asking the police to step up traffic enforcement as a mechanism to help pay for their increased budget?

Yeah.

Yes.

Uh we got to be careful about it though, for a lot of different reasons.

Um, one is uh I don't I don't know if I want to say this one inside.

Oh, thank you.

I don't know if I want to say this in front of a microphone.

Uh so yeah, in front of HTV and the Lord.

Uh so uh we have to be very careful about the way in which we deploy traffic resources.

There are ways in which we can improve public safety through going after like hotspot areas of speeders, which largely correlates with wrecks and danger and all that stuff.

Um but we've got to be careful about it, right?

Because there are uh there's been a history among cities in the United States of over policing in particular areas, right?

So we have to be super sensitive to that.

HPD does a very good job about that and being deliberate and thoughtful about where they go.

Um I'll use a proxy argument um to describe how the answer is yes, we are still doing this, but it is important to be thoughtful.

We ran, I ran an analysis in 2017 with Rice University, and we wanted to understand illegal dumping, and we wanted to understand there's uh there's a whole I'm a statistician by trade, which makes me unlikable for a lot of different reasons.

But the uh what we ran was we ran a regression model, effectively a point-in-time analysis to understand when and where could we predict when and where illegal dumping was occurring for the purposes of putting cameras up on telephone poles in a hidden way to capture the hot spots and see if we could go arrest those folks.

We we got to, after the first two iterations of the model, we got to like 68% accuracy, which is pretty dang good if you're talking about the flip of a coin.

We put those cameras up, and it was like 85-year-old women living in the community that were dumping.

Yes, there were the contractors, but we were also going in and arresting these like tiny little old sweet grandmas who were taking their garbage, tossing it.

Now, the argument is we probably had pretty poor Solid Waste service, and were they doing this as a necessity?

So that the conversation is I say that to say we got to strike a balance on something like that.

Um but yes, that is a revenue stream that goes in and that is created especially by the police department.

Yes, sir.

Yeah, just a comment.

Someone's an eighty-five-year-old grandma and they're breaking the law, they're still breaking the law.

You go arrest her next time, homie.

Okay.

Hello.

Hey, thank you so much for your time.

I really appreciate it.

Yeah, thank you, man.

Uh I just had some questions about the the property taxes specifically.

Um you said that these this uh this inflation plus population growth that was uh approved back in like 2004, 2005, right?

Does that affect just residential or or commercial or is it a big umbrella?

All at Valoran property taxes.

Gotcha, gotcha.

Um has there been any discourse from the city or the mayor's office or anybody, like I'm not sure if you know, as far as the history goes, as far as amending that law or repealing that law.

It's been amended once, and the the amendment that occurred, uh there's like a really fun municipal story about this.

It's kind of like one of the rowdiest things that's happened in Houston's history.

So in 2004, Paul Bettencourt, who's now Senator Betoncourt, but he was taxman Betoncourt at that time, uh, and a guy named Corole Robinson, who was a trustee for a couple of different things, put a measure together, and they actually put together a ballot initiative that got on the ballot, and it was to cap all revenues to the city of Houston.

That included sales tax, franchise, everything.

And Bill White saw the writing on the wall with regard to whether or not this was gonna win, and he put a competing one forward that said proposition one is going to limit just property taxes.

Both of them won, and both of them won in like the eighties range, but Bill White's got more.

So he goes, Ah, we're doing that one.

And then like they immediately turned around and sued the city of Houston.

And I still think that lawsuit is like in courts, it's still in courts.

It's kind of wild, dude.

It's rowdy.

But in 2006, what they recognized was uh oh, uh, we need to make sure that public safety can collect more money.

So prop one was what passed what we just talked about.

Prop H, two years later was an amendment to add ninety million dollars, so whatever the cap on revenue is, plus ninety million for public safety, specifically defined as fire police and public safety radio.

Uh-huh.

And uh since then, and Sally can attest to this, every single mayor has talked about doing it, and every single mayor has backed out a lifting.

Yeah, that makes a lot of sense.

But why is there not been I haven't heard anybody talk about tires at all?

Or like any say that one more time?

T I R Z.

Oh, TERS?

Yeah, yeah, we do.

So TERS is interestingly enough, are for some reason outside of the calculation of the RevCAP.

So we are that's huge.

We are just about maxed out of putting uh putting geographical space inside of our TERS.

I think the cap is 25%.

I think we're at like 24.3.

Okay.

Like we're there.

Are we talking about reform?

Is anybody brought that up to the table?

Every day, man.

Okay.

I mean, that makes sense.

I mean that's where my brain went, I assume y'all have all already thought about that.

But that's I I wouldn't say that we've thought about it comprehensively.

I think we we know that we have a list of things that we want to go through.

The mayor absolutely wants to do reform with terms.

I think where my brain goes immediately when you're explaining all this.

My other part, part two of my question is that I'm I'm a young man and I work in downtown oil and gas, and uh right now me and my girlfriend, we rent a house like 10 minutes from here.

Um I know that like our property taxes are baked into our rent.

Um, but every other person on my floor that I work with, and I'm talking like throughout the company, I'm they're they're living in like Sugarland, so that's 4K.

They're living in uh you know Cyprus, spring, and like those are all taxes of people coming in every single day using the public infrastructure that aren't paying towards the city of Houston because that collect that taxing jurisdiction isn't collecting from them.

So as the city looked at any kind of like partnership with all of the commuters and all the workforce that are coming in, because as a young man like me, I'm also thinking about planning roots.

I'm also thinking about investing.

So like I'm a potential taxpayer in the future, you know.

If I if I start investing in real estate here, but what's incentivizing me, you know, to not buy a house in Fort Benn County or in Galveston County or or towards Baytown.

So I I it's a really really good question, and I think there's a very long answer to it.

What I'll tell you is that when you go and you look at total tax burden of folks that live in Sugarland, Pearland, West You, Bel Air, it's higher than if you live in Houston.

If you go live in the suburbs, if you go live in a municipal utility district, you're gonna see anywhere of a tax burden from $1.50 to $1.80, $1.90 uh per $100 evaluation.

It's lower than that in Houston.

It the people talk about taxes as if it is the pro the reason why I don't live there because of taxes.

There's something else, man.

I don't know what it is, and it's our job to figure it out.

I'm not saying that it's not a valid question, and I encourage you to look around Houston.

For me, definitely like infrastructure.

Yeah, affordability.

Traffic, traffic, public safety are the two things that poll all the time.

Okay.

Well, thank you for your time.

Thanks, man.

I appreciate you coming up.

Hi.

Sorry, it's just tall.

Hi there, Karina Bless from uh Fonda Civic Club Friends of Fondi Park, have a couple of yes and no questions for you.

Is the landfill space cost included in the trash fee?

Uh yes, kind of.

Yes, kind of.

So we have a little bit of a um we're not going to pass on a landfill fee.

It is baked in to the operations of the city of Houston.

Uh we have a deal with our.

You would ask probably one of the harder questions.

So we don't run our own transfer stations.

We hire a third-party company, specifically Republic, or better known as BFI, to run our transfer stations for us, and they make money off of our transfer station.

So waste management trucks and uh Texas Pride Disposal trucks go to the transfer station and they charge you.

Sorry, let me stop you right there.

I I wasn't very clear.

The actual dump space, the landfill itself, which we will run out of, you know, space, and it's costly, right?

To buy more.

Is that a trash fee?

I was just about to get to it.

So no, it's not because the people who run our facilities, because they make money on our facility, they eat the cost of the landfill from our perspective.

Okay, thank you.

Uh second question can we have more transparency about consulting fees in the budget?

Can we put the budget online and have uh a fully transparent experience for it?

So I'm I think if I don't say this, the finance director is gonna come up and punch me in the face.

So if you just Google City of Houston open finance, you will literally see obviously our budget broken down into wonderful dashboard format.

You can go and look at every single check the city of Houston has cut since 2018.

Right, how about proposed consulting fees?

I'm looking at this.

Yes, yes, yes, you can go look up, pick your consulting firm, go go type in management consulting, it'll show up.

Okay, great.

And then um right-away fees across the state.

Do we charge enough?

Well, comparatively to other cities, they spike it.

But I'll tell you there's a little bit of a uh political risk around this.

So that's a great question.

I have a slide for that.

So if you look at San Antonio CPS, which is their energy provider, it's 14% of gross revenues.

San Antonio Waters 4%, which is uh one point less than Fort Worth, which is five percent, but we see four, six, twelve, eight, five, ten, it's all over the place.

What we do know um is that the state of Texas is going to look at this, this next legislative cycle.

And the one of the logic, besides having the conversation about the math itself of whether we can afford it, we wanted to come in conservatively compared to the other cities in the state.

So in the event in which the state does regulate it, we don't get our legs cut out from underneath us.

Okay, and what's our number?

Five percent.

Five percent.

Yes, ma'am.

Okay, so less than a lot of of the places.

Okay.

And then last but not least, I have a little story for you.

Uh it's actually from our report, house fire in the Greenway Upper Kirby area on May 10th.

So we're talking about how you are talking to the chief um of the firefighters.

Firefighters arrived on the scene to find smoke coming from one-story house and made an offensive attack.

A primary and secondary search were completed with no victims found, thankfully.

The fire was controlled and the home was ventilated.

HFDRson investigators were requested to determine the cause and origin of the fire.

Forty-four personnel responded to this incident.

Let me say that this was in the upper Kirby area, uh, including crews from fire stations eight, fifteen, six, three, seven, thirty-three, twenty-four, and heavy rescue eleven.

This is from the H uh FD newsroom.

Yeah.

Um comments.

I mean, it sounded like a hell of a fire.

Uh I think Yeah, well, I I think uh I'll keep the chief out.

I think the important thing is that we don't just look at whether or not we're rescuing people out of homes.

We don't just look at whether or not we can tap out a fire at that individual single family home.

We also look at, and I'm imagine the neighbors sitting next to that home that was on fire are grateful for the fact that it was put out that quickly because we don't want fires to spread to other homes because it's not just about a fire jumping and burning down another structure.

There's heat damage, the heat coming off those things are intense, but also we focus a lot on fire fire safety.

Those types of fires are I recognize that it sounds like a lot, but there is a very um safety-oriented practice towards responding to these fires.

Um I'm happy to to talk to you off to the side about it, but I think that there it sounds like a lot, but in fire suppression world, that is uh what we would consider an adequate and reasonable response.

Okay, because I'm my concern is equity across the city in response to fire.

Yes, right.

So in my neighborhood, when there's a fire, do I have five or six different stations that come back?

They're always so so we call it the readiness model.

All stations are ready to go anywhere in the city of Houston at any point in time.

Okay, thank you.

Yes, ma'am.

Thank you.

What up, BK?

Howdy.

So, um, here for first Ward Civic Club as well as Environment Texas with stuff.

Um, first, I want to just make sure and say our solid waste workers are some of the hardest working folks in our neighborhood.

We have narrow streets.

Those guys come out early, they do a great job, so nothing, frankly, they just need a lot more resources with it.

So I'm encouraged to be able to have the conversation.

We're very supportive of of the transition and being able to establish a fee because frankly, like everybody else in the state has this, and it's not really fair that we don't.

The one thing that I would say that that is really a make or break deal with us is the MOU signed by the previous administration, and I was involved in that, that with ExxonMobil and Landell Basel that has gone to uh basically they said we're gonna do advanced recyclings and we're gonna build these different facilities, like chemical recycling, and basically the technology just is not there.

We are participating in a program that segregates some plastics.

Um the facility that they've put them in has caught on fire twice.

Um Air Alliance Houston has done some great stuff.

My main comment was to be able to say we're gonna have Houstonians now pay for a solid waste fee that we hadn't had before, and we support that.

We think they need more resources.

Looking forward to the presentation on Monday with the director, but don't ask us to pay for a fee if we're doing something we don't want to do with this incineration.

And here's the really big part of it.

The Trump administration has moved to recategorize chemical recycling from regulating under the Clean Air Act to a manufacturing process, which may just have a whole gap with regards to any kind of regulation.

We have so much construction around our neighborhood from I-45 to I-10.

Air quality is a big deal.

We should not be burning plastic.

We're all supportive of FCC and their mechanical recycling, turning a plastic bottle into another plastic bottle.

That's great.

We shouldn't be incinerating plastic, putting a whole bunch of crap in the air on it just to be able to incentivize the creation of more plastic.

So really would encourage council members and administration to look at tearing up that MOU.

Thank you very much.

Thanks, Bill.

It's good to see you, man.

Hi.

Hi.

This is much taller than I am.

That's my problem.

That problem too.

Yeah, well, they could they fix yours for you.

Um so I uh oh, thank you.

Um I heard you say that the mayor doesn't want to raise the property tax rate for many reasons.

What are those reasons?

Uh he thinks that being able to pass that on.

First one out of the gate is that he believes that the way in which the city of Houston currently operates, that there is efficiency to be gained before we go and increase taxes.

Number two is that raising property taxes uh does not bring in the revenue uh in which we're it does not bring in the amount of revenue that people think it is.

It is not a uh panacea for the challenges, the fiscal challenges of the city of Houston.

So uh, for example, I was pointing to a slide that wasn't up.

Uh for example, these two things that we're doing are going to bring in a net 220 million dollars uh improvement to the general fund.

If we were to raise taxes to do that, we would have to raise our tax rate 10 cents out of the gate.

Which means uh by state law, we have to go to the voters to ask for that.

Austin just went through that process and they lost.

And there's uh the city of Houston has a requirement to do that type of stuff.

We would have to go to the voters, and then there's like only certain times that we can go to the ballot box to do things that change our charter.

And to do that, we would have to change our voter and pro voter imposed revenue cap.

We effectively have to give the pro the voters permission to exceed our rev cap that they voted on 2004.

Right.

But to raise up to the cap, because the rate is remaining flat again this year.

That's the term, right?

You don't have to go to the voters, isn't that correct?

That's right.

So what how much revenue would it bring in to raise up to the cap?

Uh so I believe that the cap uh is gonna be anywhere between like well, it's 20 million per penny.

Um, okay.

Which is an increase of about a penny?

A little under a penny.

Okay.

One penny equals about 26 million bucks.

So yeah, why why what are the reasons for not doing that at least?

The mayor believes that we can focus on other things like this that create a bigger bite at the apple um that allow us to be able to to solve the challenges and have a meaningful conversation about taxation at a later point.

Well, I'm not talking about not doing this.

I'm just talking about just raising the rate.

Yeah.

Um, so what is there a particular reason why not doing that in addition?

If if we're facing all these pressures, right, um on the general fund, then why wouldn't we want to ease those pressures as much as we could?

Sure.

Because the mayor's perspective is that we can focus on improving city of Houston services first before we ask the voters to pay more.

Oh, but we wouldn't all right.

Okay.

I'll let it go.

Um, the plan for now is to let council decide whether or not to raise the fee in the future, right?

Is it it would be by a vote?

That's right.

Every time that the fee would go up and whatever, we prescribe what the increment could be.

Uh that'll be affirmed by council through a vote.

Yeah.

Okay.

So if we are avoiding raising the cap by the amount that would raise $20 million now, how can we rely that in the future uh council would be willing to raise that fee up to $25, which is a much larger increase on a smaller portion of Houstonians, right?

Because it's what $400,000 uh on city's solid waste services, something like that.

So that's a higher fee for fewer people, right?

So how can we reliably say that that will happen when we won't even increase the property tax rate by a penny?

Uh I mean, so that's going to be part of the budget process every year for this.

Um so each year we have to look at what revenues and expenditures are gonna be.

I will tell you, and I said this earlier to the gentleman who came up, I think it was you maybe, um, talked about the uh the subsidy that is occurring within the combined utility system, and that is uh by design a temporary thing.

We have prescribed how long that we believe the combined utility system could carry the subsidy itself before we start to have to have conversations about projects.

And so I think by design we have to have this conversation.

And again, this is the mayor's budget, and within the mayor's budget, he has prescribed a period of time in which we are going to have the conversation with the city council about increasing the fee.

Okay.

Um more question.

I know it's uh been a long long QA.

Um, but uh the solid waste budget has that increased, stayed the same?

Uh it'll increase slightly.

Increase slightly, yeah.

Um, is that because of the fee or is it just the amount budgeted for it?

A little bit of both.

So part of it is gonna be contractually mandated pay raises as well as us knowing that we're gonna be able to uh going we're we've got because we have a revenue stream coming in at five dollars, we're gonna be doing a little bit of debt service type stuff, that revenue bond that I was talking about for purchasing new vehicles.

Are there any plans to hire more um solid waste workers?

That is the only thing is one of the few positions that we have never put a hiring restriction on.

Uh we go to job fairs all the time.

We bring in new solid waste.

Actually, we hired like 18 uh single side loader operators like two weeks ago.

Okay.

So yeah, we are constantly hiring in that department.

And uh public works lost, uh I think somebody told me, like around 300 people.

Um are there plans to hire more public workers?

Depending on the position, we keep those positions open as well.

But for the most part, a lot of public works employees we would consider like critical frontline positions.

Okay, yes.

So not necessarily all 300 of the loss.

Just depends on the position.

Okay.

All right.

I think I think that was all I had.

Thank you.

Thank you.

Oh my god, the end of the line.

Uh Joe Higgs with the Metropolitan Organization.

I waited to the inks.

I have some kind of specific questions, and I'm not sure if you're the one to answer them or not.

We are um concerned about funding for demolition of buildings.

The city transferred some money last year to make, you know, because there's a backlog of houses that need to be demolished.

Wondered what had happened with that.

Is it likely the city would have to do something like that again to you know continue to catch up with the backlog, or is there enough money in the demolition fund?

And I'll so in general, is there enough money?

And then I'll just state specifically we've been working with some folks in Northeast Houston to get the city to look at, and the city has had demolition orders in on some buildings of a long abandoned Kmart for 20 years.

And they're working to get the final order, you know, to do what they have to do to be able to do it.

But we want to make sure that we don't, you know, somewhere in the year say, oh, well, we're gonna have to wait for another year to come up with the money to do that.

Yeah, that's a good question.

It's in two parts.

The first is that uh we are continuing to utilize stormwater funds where it is appropriate to do demolition of uh of structures that are in specifically the floodway or have a direct impact to drainage.

Um it is about 7,500 to 10,000 dollars per demolition, unless it's a super complicated commercial structure like the Kmart that you're referencing, which will cost a lot more.

Um those processes are generally reimbursable.

So one of the things that we talked about with council members whenever we were passing this item is that when we destroy a home, when we go in and demolish a home that's vacant and has no certificate of occupancy, creates a blight, we lean the property.

So eventually when the property sells, it will go back to that stormwater fund if that fund is used.

However, there are under other funding streams.

So we allocated $30 million, I believe it was 30 million uh last fiscal year out of the stormwater fund for demolition of uh dangerous buildings.

Uh we refunded, I want to say like 20 or 25 of it at the end of the fiscal year, but we're allocating I think about the same uh for this fiscal year as well.

But there are two thousand uh twenty two hundred structures across the city of Houston that we would consider dangerous, but it is a lengthy process, and this is always a good thing, uh, that the government has to go through to be able to say we are going to demolish your home.

It is very played out by state law.

It is intended to be slow and arduous on the burden of the city itself.

So you're able to refund 25 million of it because of the money recaptured from the liens?

No, because we didn't get around to the demolishing the things because of how difficult the process is.

So, I have a lot of years.

Thank you.

Okay.

And of the 2200, about 300 of the 2200 homes that are eligible for demolition.

About 300 have actually gone through the process to be able to be demolished, so that means they're ready.

And today we are demolishing like 10 of them.

Okay.

All right, good.

Uh a second area of interest is the uh ditch reestablishment program, and wondered if you could, because uh lots of northeast and southeast Houston depends on ditches for our our uh you know drainage.

Um wondered how much progress had been made on that in the last year.

How much money is going to be in the budget this year?

And is there a rollover from last year?

Kind of where are we with that?

What's the progress on it and how much money and is it enough to get it moving?

So it's definitely enough to get it moving.

Um I think actually is a little I had a conversation with public works folks about this yesterday.

Uh we actually think that it's a little bit more than what we need, and the reason why is because Randy, the public works director, has gone through great effort to purchase a whole bunch of ditch uh we call them great alls, but they're effectively ditchy-establishment machines, and we are doing more work within that.

Um so there's two types of work that we do there's in-house work and contract work.

Um we believe that the fund well covers the cost of contract work and our in-house folks are doing a good job with it.

Um I am waiting for them to give me the numbers of how many linear feet of ditch we've re-established, but it is we are very much on schedule with what we're trying to do.

So as you recall, last year there was an amendment put forward by council member Jackson 20 million dollars for the local drainage project and 20 million dollars for the ditch reestablishment.

Um, and that money is very much being put to good use, such good use that we actually um baked in those budget amendment numbers into this year's budget.

So we are starting, it was if we budgeted last year for this, the budget amendment put it here, we're starting here for this fiscal year.

So we're baking it in.

So what is here?

Is that 40%?

Yeah, it's fifty million dollars additionally inside the program.

Inside of both the local drainage project and dictary establishment program.

Okay, all right.

And I guess you sort of alluded to the problem of you know the the revenue cap, and nobody really wanting to do it.

Um it seems like we certainly have a a revenue problem with the city.

You're gonna do everything you can.

It sounds like you're making great progress, but ultimately it costs money if you want police and fire and all these other services.

And we're having a philosophical and probably an important strategic shift to put some of this on fees, which are not covered by the revenue cap.

But ultimately, are we gonna have to get to the point where we deal with the revenue cap because there just ain't enough money in fees?

I think so.

At its core, uh the city of Houston's local revenue cap puts us at a distinct disadvantage to other cities in the state.

Dallas has a revenue cap as allowed by the state, Austin, San Antonio, Alpha, all of them have revenue caps, but it's the same one that the state prescribes, which is less restrictive than our self-imposed one.

So I think as long as Houstonians want to keep our the general fund at a disadvantage comparatively, then let's keep this cap in place.

So we do have to have that conversation.

I'll tell you from uh having a conversation this is complicated.

It's taken, I mean, we're 15 minutes over when I see on the thing that staff begins event breakdown and cleanup at 11 30.

That's not your fault, that's mine.

Uh but the it took this amount of time for us to sort of land on where I think we can have a cogent conversation about what we're trying to do with one fiscal year.

Let's try and explain Rev caps.

Thank you, ma'am.

Thank you, Councilmember.

Thanks.

Huge round of applause for Stephen David, who's been standing up here for hours on end.

Um, great questions.

You guys have studied this, you know it.

Some of us have advocated for additional tax revenues.

You know, we're this is the mayor's stance, but uh, you know, I've advocated that we go up to the cap um in the past.

I do support what we're doing here to put to relieve pressure on the general fund this year.

Um, but great questions.

We're still discussing the budget and considering the budget.

We have budget workshops that will go on uh tomorrow.

Uh I mean Monday, sorry, and at 1 30, very important.

The public works and solid waste department will be presenting.

So a lot of there'll be a lot of interest on that.

But we'll be covering about six or seven more departments.

Oh, there's your schedule right there.

And then I do this budget survey every year, your two cents.

Thanks.

I know a lot of you have already filled it out, but please fill it out if you can write in the comments.

I read out the comments at the city council table.

Uh, I don't give your name or anything, don't worry.

Um, and uh anyway, I just want to say thank you all so much for coming.

This is also important.

A huge thank you to Steve and David and to all of you for spending your Saturday morning with us on and on a very important city issue, and I'll let uh Mario close us out.

Thank you, Sally.

I also want to thank you all for being here.

Um it's important for us as your chair and your vice chair of your budget committee that we bring this process out to the community, uh hear from y'all at a time that's not two o'clock on a Monday or a Tuesday.

So we host these town halls.

We're having a virtual town hall on the twentieth at 6 p.m.

So that uh if that works better for you, you can come and learn and ask your questions.

There are some more uh important budget workshops taking place.

So solid waste and a budget workshop is where the department comes in to the budget committee and presents and deep dives into that specific budget.

So solid waste will be at 1 30 on Monday uh in council chambers.

You can also watch along uh on HTV or online.

You can call in with questions, pre submit your questions.

Public works, 2 30 on Monday.

The fire department, 3 30 on Monday, uh and then on the 19th.

I know we have some HPD questions, HPD's budget workshop is 11 a.m.

on Tuesday the 19th.

So if you're interested in deep dives into those departments, those are great opportunities uh to continue participating.

Thank you all for being here.