Okay, we are back.

And thank you to the Office of Business Opportunity for joining us today.

We have the Director Celynthia Hoard and also Patsy Jackson to present the proposed Office of Business Opportunity Fiscal Year 2027 budget.

So you may begin.

Good morning, good morning.

Today I'll present to you the proposed FY 27 budget for the Office of Business Opportunity.

According to the Chamber of Commerce, the Business Directory, Houston is home to approximately 319,000 small businesses, a little over that.

And Google Maps reports that we have about 273,000 small business operators in Houston.

Houston is growing as a growing metropolis with new business opportunities sparking every day.

In accordance with feedback from the community and changes in the business climate, we've adopted a new mission, which states that the Office of Business Opportunity provides equal representation and advocacy for all small businesses by creating pathways to partnerships, education, and accelerated growth.

In alignment with our new mission, I'll discuss a budget that is reflective of this change and with consolidated services and new KPIs.

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Our budget presentation will provide insight to our strategic alignment to the mayor's priorities, our plans to eliminate gap, OBO expenditures, outcome based programs, and our revenues.

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As you can see on this slide, the work of the Office of Business Opportunity Alliance with two of the mayor's priorities, primarily government that works as well as infrastructure.

90% of the work of OBO Alliance with government that works, and 10% of our work aligns with the priority infrastructure.

As you can see in the first table, the majority of OBO's work supports interworkings of city government as we support small business contracting opportunities through the administration of certification and designation and our contract compliance team.

The remaining 10% of our work supports building the infrastructure of small business through community capacity building, collaboration, and workforce development services.

In an effort to close budgeting gaps, the department proceeded with a reduction of two vacant positions, totaling approximately 171,000, and over $300,000 of our non-personnel budget was also reduced.

The elimination of this gap total an overall reduction of over 201,000.

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Expenditure by fund.

The expenditures for OBO are general and personnel related.

From FY 26 to FY27, there's 11% increase in the general fund due to the addition of staff transfer from the finance department and for staff health insurance pension and meet and confer agreement.

And FY26 FY27 Special Revenue Fund shows an increase in expenditures of 20%, which is due to city departments forecast and increase in contractual agreements, which will increase the pay or play payments.

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OBO's total proposed budget is $6.2 million with fund 1000 and fund 2424 combined.

As indicated in the personnel breakdown graph, the majority of OBO's personnel spending, which is 85%, is accounted for in the general fund and 33% in the special revenue fund.

Only 16% of the general fund accounts for non-personnel spending.

Non-personnel spending in a special fund is 67%, which is interfund transfer to support the police and fire department, which will be detailed later in the slide.

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Expenditure by program.

As OBO tracked their expenditures by program, you will also see this in this slide as well.

There's a 100% decrease in business support and development department services and workforce development services in FY27 budget as those programs have been consolidated into the external fairs and contract compliance divisions where there are positive variances of 522,000 and 633,000 respectively.

Additionally, contract compliance and external fails have increased expenditures due to filling vacancies.

This adjustment was made to cut duplication and to more accurately reflect the work and structure of the department.

There's also an increase in expenditures and administration services due to increases in personnel costs such as health, insurance, and pension.

The increase in certification and designations is attributed to personnel shifts and to the division to support certification processing.

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Now we'll take a look and a dive into the specific budgets and the KPIs for each of our OBO divisions.

Administrative services is comprised of our executive team and aligns with the mayor's priority of government that works.

We have 5.6 FTEs.

The program sets and implements the strategic direction policy and long-term girls goals of the department, manages the budget personnel matters analytics, our Title VI compliance, and directly engages with the mayor's office and city council.

The proposed budget for FY27 is 1.5 million for that division.

And KPIs include new participation goals for purchasing categories, our Title VI requirements, and our budget actualizations.

There's actually one error on this slide FY 27 targets for goods and for services.

Those actually are targeted at 15% for good, and it should be 6019% for services, and we'll make that change in the SharePoint.

We didn't meet or exceed our targets in FY26.

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You'll see on this previously, this priority of infrastructure has been consolidated.

Business support and development has been consolidated with external affairs, so that will no longer be a standalone program.

You can also see that the targets for FY26, those targets were also met or exceeded.

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Certification and designations.

This is priority government that works.

We have 13.3 FTEs in the certification division.

This program certifies our businesses for participation on the city and federally funded projects throughout the region.

Certification types include our minority women and small business enterprise, persons with disabilities, veteran-owned small business enterprise, the service disabled veteran small business enterprise, our disadvantaged business enterprise, airport concession disadvantaged enterprise.

Additionally, the division serves as the administrator of the higher Houston First Local Designation Program.

The budget for this section is 1.4 million.

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And the work that they've done to get the certification processing down.

Currently, we had an average of 14 days for processing our certifications, and the goal is to keep that below the 30 day time frame.

You'll also see that 30% of our total contract awards have been to our certified firms.

We have 400 new firms as of last year, the fiscal year, 200 renewed DBEs and ACDBs, and remaining measures have been eliminated to adjust for that.

Some questions that I wanted to answer and just go ahead and take a deep dive is that there is a considerable lower target for the federally funded the federal program, and that is because of the pause.

We know that the pause will go well into the new fiscal year for us, and so we didn't want to we want to manage expectations.

We don't want to say we're gonna do a thousand.

We don't think we will, and so we've lowered that number considerably for both of the certification programs, the local and the federal.

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Next slide is contract compliance.

Um this is also aligned with government that works.

We have 17.3 FTEs there.

This program enforces our local, state, and federal labor standards and prompt payment requirements on contracts in addition to monitoring the contracts with MWSBE, DBE, and ACDBE goals to ensure that there is compliance with all of our federal and local good faith efforts requirements and policies.

This team collaborates with all our city departments on the final evaluation and rating of our projects.

This includes the funding here.

You'll see some health benefits.

There are some increases in contract compliance because of the revenue that comes from HPW.

Um you'll see also that the budget for this area is 2.02.0 million dollars.

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The KPIs for contract compliance.

Um we've added some updated for this division as well to better reflect the higher level of efficiency and to track the outcome and impact of our contract compliance division.

As we read each measure, you can look at the average number of business days to complete our closeout.

That's a new measure.

Um we want to measure how long it's taking us to close out contracts, and we want to meet a 30-day measure for that.

Um, the percentage of construction contracts receiving a satisfactory rating.

Um we were already rating the compact contracts, but that has not been a KPI in the past.

Um, so we've added that for 80 percent.

Um, the percentage of contracts that do not meet satisfactory rating, want that to be low, so that is a set 25% uh goal that we've also added.

Another new goal is the percentage of pay or play funds collected from contract and selecting the pay option.

We want to make sure that we're collecting those funds at a 90% rate, so that is also a new measure.

Um existing measures were the percentage of closed construction contracts meeting our labor standards requirements, and 75% is our proposed target for FY27.

We've gone up a little bit because we do see that we've increased a year over year as we monitor more.

Um, and we've also continued the percentage of closed contracts meeting or exceeding the awarded contract goal.

At 85%, we continue to actually exceed that measure.

Um, lastly, is the percentage of new and existing contracts in which the vendors choose play that provide the health benefits.

We want to actually take that measure out because we've added the other percentages above.

Um I do want to add, although we did not meet the target for 26 as it relates to labor standards, we did make a substantial increase year after year, and we look forward to increasing that this year.

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Previously, our department service program was a program that uh worked on compliance and meet setting the MWSDBE goals on these contracts.

Um, so we have consolidated department services, again, done some consolidation to reduce our gap into our contract compliance division.

So you see that those measures, but there um they did meet and exceeded their targets for FY26.

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Our external affairs division is the only division that supports the mayor's priority of infrastructure.

This program assists in the success of small business owners and entrepreneurs by providing impactful business development and capacity building programs as well as business support services.

It includes general guidance, connections to business development, working with organizations and community partnerships.

It also administers the workforce development initiative that we lead in the department.

Um there are 4.9 FTEs in this division, approximately $500,000 a little over, is the budget for this division.

The KPIs that you'll see here, there are a couple of new ones, and so we're looking at the percentage of businesses that were engaged by external affairs that actually become certified.

And so our goal is 25%, as this is a new measure for FY27.

We're also added the average staff hours required to document the services to see how efficient we are with our tracking and documenting our services.

We've added the number of participate participants who attend our workforce development events who actually complete an on-site job interview.

This is also a new measure, 500.

And then we have the percentage of businesses reporting the services received met their needs, and for building business capacity and contracting.

We want that to be at 95%.

So most of the measures in this division, we looked at feedback from the community.

We also had a strategic planning session where we came up with these new measures.

The last one is the percentage of survey businesses that report a favorable perception of OBO services during the fiscal year, and that's also set at 95%.

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So there was a set separate uh program, but we consolidated that as well.

And so you'll see that those um there's no funding listed there.

But if you look at the measures, um we did meet and exceed our performance measures for this area as well.

The one where we're still working is the percentage of attendees receiving job offers, um, to more accurately track that.

Um, it's a little difficult because sometimes our providers don't provide that information once they leave the site, and we have to get that third hand from workforce solutions, but it is something that we're working toward.

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This slide is reflective of the special fund uh 2424.

Um, there are zero FTEs in this fund, but this is under the government that works, and this is the interfund transfer that goes to the Houston Police Department, also goes to the health department for their services.

So it comes through our department because we collected through POP revenues.

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Revenue highlights.

This slide shows significant changes in OBO's revenue.

The general fund has a slight decrease of 2.37%.

Special revenue fund has an 18.13 percent increase.

Special revenues increase can be attributed to HPW, HAS, and HCD, anticipating additional contracts in FY27, which would increase the contract responsibility fund revenue based on vendors choosing the pay option.

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As you can see, there's a decrease in general fund revenue, but an increase in special revenues for FY27, and it's just a graph showing what we just previously talked about.

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Revenue by fund.

This slide further shows the 2.37% decrease in general fund and the 18.13% increase in special revenue funds.

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Revenue by program.

This slide reveals an 8% increase in revenue in the contract compliance division.

This is projected based upon forecast of increased contracts by departments in FY27.

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That concludes our presentation.

Any questions?

Great presentation, really appreciate all of the detail, and I like the new performance measures, those are great.

I will go to council member Martinez.

Thank you, Chair.

Uh director and to the OBO team.

I want to say first and foremost of 30 days, congratulations.

Um, I remember formerly as a staff.

There were backlogs that were like 1,400 applications, and so to be able to get us to a point where small businesses can really do work in the city of Houston is important.

I think we all know this that ultimately small businesses would really lift up our city.

Uh, the way they hire folks, they you know, recycle that dollar in the city of Houston.

So thank you for that work.

Um, and then also just want to give a quick shout out as well to the external affairs program.

Um, we've had a couple uh projects with you all, uh, coffee with the prime and then coffee with the contractor to make sure that we're also helping increase how many folks are being certified.

Um, last last budget session I submitted to uh budget amendments one was to look at fees outside to the since we are the regional uh uh certified certifying agency.

Um, I know we discussed about you know, maybe seeing what can we do to ensure that we're helping support the number of staff that you need, um, to ensure that we're continuing to move in that that same positive trajectory.

Um, where are we at in those conversations?

And then the other one um, of course, was increasing the fees, and I think we've seen some of some work towards doing that.

If you can give an update, um, and that way if I don't have to submit any budget amendments for OBO, sure.

So the um we had a fee study, which took a little while, um, and so we do have fees that we're ready to roll out.

We wanted to wait and hear what the judicial uh response was from the federal um uh challenge that we have.

We still have not had a ruling, and so we didn't want to roll out fees and have to backtrack and change them.

And so we are ready to roll that out, and so as soon as we have something, I'll be back to present that to the economic development committee.

I'm excited about that because y'all need some more funding as well.

Absolutely.

Um and then the the fees for other government entities.

What about so uh that was very hard to track.

So what we looked we've gotten approved is to have a um directory lookup fee, and so we're looking at what that is, and that will be across the board, right?

And so those entities generally use our certified directory to look up firms to make sure that they're certified to verify.

Um, so we're looking at a directory fee, be something like a dollar, two dollars per lookup, nothing major, um, but that would uh allow us to um assess a fee across the board.

That's important.

I think what we're starting to uh actually uh understand that the city of Houston, we I think we've known about it, but I think this real structural reform conversation, what does that look like?

Um, you know, especially if we're depending on just property taxes and sales taxes, and that is not gonna be sufficient for us to run a city of this size with so many services that are needed, and so um, you know, it's probably a word that you know not everybody wants to talk about it, but um I'll be saying fees uh as much as I can to make sure that we're ensuring that we are providing the the right uh amount of um resources that y'all need a right size, ultimately is of course correct where we've been needing to go with the city, so thank you.

Thank you.

Yeah, council member Martinez, we've been working on that, getting other other entities to charge for for quite some time.

So glad to hear that's kind of moving forward in some way, shape, or form.

Councilmember Ramirez.

Thank you, madam chair, and thank you, Director, for the presentation.

Good to see you again.

Uh you in regards to the fees for certification.

You mentioned that you had some idea of what that fee was going to be, but then you're holding back because of a judicial ruling that we're waiting for.

Can you explain how the judicial ruling may affect what the certification fees will be?

So the judicial ruling is whether we will continue with the MBE uh portion of the program.

And so we didn't want to start charging MVEs, and then the program is is eliminated, and so we want to wait and see where we stand and what our standing is before we start to implement fees for the small business community.

And do you have any idea when when a ruling is expected on that?

We thought we would have something by May, but no movement.

Okay, slide 14.

You referenced or the measures reference labor standards, yes.

Uh on the percentage of closed construction contracts meeting labor standards, and uh yeah, I think it's mentioned again there, percentage of contracts that do not meet satisfactory rating.

What uh how do the labor standards play into that and specifically what labor standards are you referring to?

So for labor standards monitoring, we are required to monitor the prevailing wages that are paid to um employees for on our construction contracts, and so as we're monitoring those, we're looking at the EEO, making sure that people are um not discriminating on the job.

We do that through site visits and interviews, um, but mostly it's the prevailing wage rates and making sure that we are capturing those and that firms are not underpaying their employees.

Um we do have firms that when they don't put that information in when they are not compliant with that, that is a um unsatisfactory rating that you'll see.

You see that during closeout that there was an unsettled labor uh standards, and so that is that rating.

We want to make sure that we're getting that up.

All right, let me ask you about slide number nine.

Um this is where you measure contract participation and in the target context on all these measures, it says measures the dollar dollar amount.

Is that the dollar amount when the contract is awarded or when the contract is awarded?

When the contract is okay so we we receive complaints every now and then from small businesses that tell us, hey, we were part of the the original uh award, and then we were told, oh well, your the scope of work that you offer is no longer needed.

Uh what are the consequences for for uh that sort of practice?

So there are two.

Um I guess there's two trains for that.

And so there are some times when the department does change the scope of work, and so you'll see that in the closeout.

We try to put a detailed memo myself and Randy will submit uh Director Mackay, we will submit a uh joint letter detailing when the scope of work changes by his departments, usually HPW that has a change of scope.

Um, and once that happens, sometimes they're not able to find a firm or that firm has to self-perform if it's emergency work or something.

Um, instances where that is not the case, uh, we do have the ratings.

Um, and if you have a pattern of noncompliance, then we issue, we start down the road of sanctioning.

Um, the OBO director is able to sanction a firm um up to five years.

How often does that occur?

Uh not often.

Usually uh people don't want to give more than one UNSAT.

They they generally uh once you give someone an unsat, we usually don't see that pattern again on the um the goals.

All right, last question has to do with slide 18.

Interfund transfers related to HPD's crisis called diversion program and health department's client access program.

Can you can you kind of explain to me how how this this relates to OBOs?

Um so we have an interdepartmental agreement, um, and so the POP program, of course, is to ensure that uh most of our contractors are paying health insurance, and for those who are not, they um just they pay the one dollar per contractor per hour, right?

Um, and so that those funds come through OBO, but we transfer those funds over to the health department and to the police department for their um their programs, and you can see I think it's an appendix.

Will we show the savings on that appendix page 2028, please?

Yes, 28.

And we actually see the pay or play program.

You can see the funding um savings that they incurred based on the dollars that were transferred over to those departments, and so for the crisis diversion program, um, then that is with um the fire department.

They had a cost saving of 1.7 million based on the avoidance of usage uh for them based on using the caps program.

Um, sorry, the crisis diversion program, and then 1.6 million is the cost savings for the client access program where they actually have case managers that will if you call and you're in distress or there's mental health issues, those case managers are work to uh refer people to the services that they need.

I see, and uh and I'm not sure I saw this anywhere, but what's what's the projection for FY26 on that?

For POP or for the for the interfund transfer?

Is it saying?

Well, for both.

It's 400,000 for caps and it's 230,000 for crisis version program.

Okay.

Uh and last thing I neglected to ask you when you look at um uh contract compliance.

Uh what I was asking you about before slide number nine.

How many how many uh FTEs do you have working on that?

Uh contract compliance, we have 17 FTEs for this F come at FY27.

Okay, thank you.

Chris with Council Member Salinas' office.

Thank you, madam chair, and thank you for all that y'all are doing.

Uh my question is a follow-up to one posed by council member Ramirez.

Um relating to the prevailing wages that you had mentioned.

Uh you'd mention that that being the predominant reason that some of these contracts are failing to meet labor standards.

Is what are the sanctions and penalties for any company or contractor that's failing to meet those uh labor standards and is there something that the city could do to help, you know, uh enable these contractors to meet those standards?

So there are two.

So one is we have new policies and procedures.

Our new policies allow for us um to collect the underpayment at the time that it's issued if the um if the contractor does not make the employees whole.

So what occurs with an underpayment is we'll look in there, and let's say you've underpaid some employees uh $500,000, and then there's a penalty assessed with that.

Um you have 30 days to make that whole.

If you don't, the new policies allow us to go to uh the department and pull those funds out so that we can ensure that those employees may hold.

So that's one change that we made with new policies.

The other piece is if there's an um unsatisfactory and there's three unsatisfactories, that's when we start as a um detail with councilmember Ramirez to sanction those firms.

But generally, once a firm is unsatisfactory, they don't want that record coming to council.

Got it, thank you.

Okay, I don't see any other council members in the queue.

I submitted some questions in writing.

Um, really appreciate all the good work OBO does.

I think we'll move now to public speakers.

Thank you very much for your presentation.

Thank you for your time.

Okay, we will call Astrid Lang.

Well, I've figured out how to turn it on.

Um, thank you all again, and uh to the Office of Business Opportunity.

Thank you for everything that you do, especially.

In an ideal world, but that is not the situation right now.

So I don't have any questions with like data and numbers.

It's a little hard to that's a little bit fuzzy for me to see.

So I just want to reiterate support for what you are doing with your federal challenge and all of the other side issues that you have to deal with.

That's all.

Thank you.

Thank you very much.

And yeah, I know it's difficult to see all that.

All these presentations are if you look at the budget and fiscal affairs committee website, they're all on there too.

Um, okay, great.

Laura Gallier.

Thank you.

I have basically just one topic to bring up, and it's called hire Houston First.

I think that may be there's the goal for that was NA.

Um, and I was curious what happened to that.

And as part of my question in doing my research for the budget, one of my um rabbit trails that I went down was oh, we can look at the city's checkbook.

So I did, and most of the purchases that I saw were local, but there were um Houston Public Works.

I only looked at a couple of months because it was a lot.

Um Houston Public Works was hiring uh a consultant from Canada and a consultant from Pennsylvania, and so in connection with my question about hire Houston first.

I'm just curious, do we have rules about that?

I asked the same question in one of my written questions because I did notice notice that the performance measure had been um had been kind of zeroed out.

So I don't know, director, if you have if you want to address the higher Houston First program.

So the Higher Houston First Program is still um a part of it, but we are looking at all new certifications, so we're gonna count that there, but I could add the measure back just so that we're tracking it.

Um, and so we're looking at all new certifications is one in our certification measures.

Um, and as far as um, I guess your question about external entities.

Uh yeah, we'll be able to address that maybe in the public works workshop this afternoon.

But she just tracks that y'all are tracking Higher Houston First.

You're just including it in the big measure of certifications.

Yeah, I'd like to I'd like to see that that remain to be tracked, but I don't want to get in the I know EY went in and firmed up y'all's um performance measures.

I don't want to get in the middle of that, but but it it I I'm glad to hear the program.

I mean that still gives you a priority if you are a Houston-based company.

Yes.

Okay, that's what I wanted to really know.

Thank you.

All right.

Any other additional public speakers?

Okay, seeing none, we are concluding our Office of Business Opportunity, and we will break until 1 30 when we will have public works and solid waste.

Thanks everyone for your participation.