Houston BFA Committee Meeting - September 29, 2026: Financial Reports and Bond Transactions

The Budget and Fiscal Affairs (BFA) Committee, chaired by Councilmember Sally Alcorn, met on September 29, 2026, to review the monthly financial report for the period ending August 31, 2026, and to discuss upcoming financial transactions, including combined utility system bonds and airport special facility revenue bonds. Key topics included the right-of-way fee, sales tax on the new garbage fee, and guardrails for utility transfers.

Consent Calendar

• No consent calendar items were presented.

Public Comments & Testimony

• Dominic Mazoc signed up to speak but was not present. No public comments were made.

Discussion Items

• Monthly Financial Report: Finance Director Melissa Dubowski presented the general fund projection ending fund balance of $294 million (11.2% of expenditures less debt service and pay-as-you-go) for FY27, which is $45.5 million lower than the finance department's projection due to lower revenue. The fund balance is $97.5 million above the city's 7.5% reserve target. The projection assumes $104 million in revenue from the proposed right-of-way fee; if not realized, the fund balance would drop to $190 million (7.3%), below the target.
  • Deputy Controller Will Jones presented the 2+10 financial report, projecting a $339.5 million ending fund balance (13% of expenditures), $143 million above the 7.5% target. Only the asset forfeiture fund projection changed (increased by $2.8 million due to higher confiscations).
• Sales Tax on Garbage Fee: Vice Mayor Pro Tem Amy Peck questioned the application of sales tax to the new $5 administrative garbage fee. She noted the models showed $24 million yearly to the combined utility system, but the actual amount is $22.176 million, with $277,000 going to the general fund and $1.5 million to sales tax. She asked whether a comptroller determination was obtained. A representative from the city attorney's office (Eric) confirmed that state law requires sales tax on garbage collection as a real property service. The city received a Comptroller's opinion that when a specific fee (not a tax) is charged, sales tax applies. The drainage fee and container lease fee do not appear to be subject to sales tax. Councilmember Ramirez asked about sales tax on water sold outside the city; the legal representative agreed to report back.
• Upcoming Financial Transactions: Director Dubowski presented two transactions:
  • Combined Utility System (CUS) Bonds (Series 2026 B, C, and D): Total expected size $1.76 billion. Series B ($785 million) will refund bonds via tender and take out commercial paper. Series C and D ($975 million) will refund variable-rate debt into fixed-rate debt and terminate swap agreements. The transaction also seeks to modernize the master bond ordinance, including adding guardrails on the right-of-way transfer (proposed 9–10% cap on gross revenues, though the FY27 budget is at 5%), establishing an interest and sinking fund for debt service, and defeasing old bonds. Estimated net present value savings of $4 million (0.25%), true interest cost around 4.25%. The transaction requires bondholder consent (at least 50% +1) for ordinance amendments. Next steps: RCA to City Council in October, pricing in November, closing in December.
  • United Airlines Special Facility Revenue Bonds (Terminal B): The remaining $850 million under the $2 billion MOA, after issuing $1.1 billion in 2024. These bonds are supported solely by United's lease payments, not general fund or airport revenues. Anticipated true interest cost 5.8–6.2%. Next steps: council actions in October and November, pricing and closing in November.
• Discussion on Right-of-Way Guardrails: Councilmember Ramirez asked about the proposed cap on the right-of-way fee, noting the five percent start. Director Dubowski explained the 9–10% range was based on peer cities (e.g., Austin Water 8.2% cap, San Antonio CPS 14% cap) to provide flexibility for future councils. Councilmember Martinez emphasized transparency, asking how future increases would be communicated and tied to water rate studies. Director Dubowski noted that quarterly reports on the CUS financial health will come to BFA. Councilmember Alcorn recalled legislative talk about capping right-of-way fees; Director Dubowski said the city's 5% is conservative compared to peers (e.g., San Antonio utilities transfer as much as property taxes).
• Airport Bonds Update: Councilmember Martinez asked about the United bonds; Director Dubowski noted that enabling project cost estimates came in under projections, so less than the $624 million in general airport revenue bonds may be needed.

Key Outcomes

• No votes were taken during the meeting.
• The committee will receive quarterly financial updates on the Combined Utility System throughout FY27.
• RCAs for the Combined Utility System bond transaction are expected at City Council in October 2026, with pricing in November and closing in December 2026.
• For the United Airlines bonds, council actions are anticipated in October and November 2026, with pricing and closing in November 2026.
• Legal will report back on sales tax applicability for water sales outside the city.
• The meeting was adjourned; the next BFA meeting is scheduled for November 2, 2026, at 10 a.m.