Budget Fiscal Affairs Committee Meeting - November 2nd, 2026

The Budget Fiscal Affairs Committee, chaired by Councilmember Sally Alcorn, convened on November 2nd, 2026, to discuss a packed agenda including the quarterly financial report, upcoming financial transactions, departmental overtime projections, the parks open space ordinance, P-card expenditure trends, and an audit division update. The meeting included multiple presentations, public testimony, and robust councilmember questions.

Public Comments & Testimony

• Jack Velinski spoke on budget matters, urging the city to increase revenue through tax rate adjustments rather than deferring maintenance. He noted that deferred maintenance was projected to grow from $750 million to $1.5 billion over five years, and argued that underspending now costs the city more later.
• Beth Martin (Environment Texas) expressed strong support for the proposed open space ordinance changes and fee increase, citing Houston's 69th place in the Trust for Public Lands 2026 Park Score rankings and the need for reliable park funding.
• Phoebe Tudor (virtual, former Parks Board member and Herman Park Conservancy supporter) spoke in favor of the plan, calling parks "an important part of a beautiful city" and urging continued annual increases.
• Justin Schultz (President/CEO, Houston Parks Board) highlighted that the city spends $64 per capita on parks versus $128 in Dallas and a national average near $192, and argued the fee increase is essential to leverage private and philanthropic contributions.
• Adrian Moschenberg (Oak Forest/Garden Oaks resident) supported the fee increase, arguing that developers profit from proximity to parks and should contribute more, noting that many new developments market themselves using nearby city parks.

Quarterly Financial Report

• Deputy Controller Will Jones presented the financial report for the period ending September 30, 2026. The general fund is projected to end FY27 with a fund balance of $36 million (11.7% of expenditures less debt service and pay-as-you-go), which is $45.5 million lower than the finance department's projection due to lower revenue estimates. The fund balance is approximately $109.5 million above the city's target of holding 7.5% of expenditures (excluding debt service and pay-as-you-go).
• Enterprise funds (aviation, combined utility system, CNE, stormwater) show no changes from the adopted budget. The city's commercial paper and bonds remain within the 20% variable-rate threshold.
• The quarterly investment report shows $7.12 billion in the city's investment pool, $818 million higher than last year, yielding 4.085% (up from 4.008% last quarter). The Fitch rating remains AAA.
• The city's two swap positions had a net receipt of $552,000 for FY26, with a fair value of negative $32 million (improvement of ~$50 million from prior quarter).
• For the Houston economy: total non-farm employment stood at 3.495 million in August, up 1.2% year-over-year; unemployment rate 5% (unchanged from August 2025); average oil price $97/barrel in September (up 16% month-over-month, 52% year-over-year); single-family home sales down 5.7% compared to September 2025; median home price down 0.3%.
• Director Debowski noted that projected overages in categories like food, travel, and office supplies are offset by savings elsewhere. She confirmed that the right-of-way fee will be implemented as anticipated. Budget transfers for crisis call diversion and crisis intervention programs are for operational purposes only and do not affect final adopted numbers.

Upcoming Financial Transactions

• Director Melissa Debowski presented upcoming transactions. For the Combined Utility System: a Texas Water Development Board (TWDB) State Revolving Fund (SRF) loan application for up to $76 million to finance the North Belt Wastewater Treatment Plant improvements (expected interest rate reduction of up to 35% below benchmark); and a Water Infrastructure Finance and Innovation Act (WIFIA) loan application for the Eastwater Purification Plant (entire project ~$4 billion), with terms to be finalized and brought to council in calendar year 2027.
• For Houston Airport System: a commercial paper expansion from $350 million to $425 million (increase of $75 million) to support capital improvements. The selection of TD Bank was questioned by Councilmember Ramirez regarding legal troubles and anti-money laundering issues; Director Debowski noted the legal department evaluates such factors and Canada is not a prohibited country under state or local law.
• For Convention Entertainment Facilities: a new note purchase facility for liquidity (up to $175 million) following the modernization of the master bond ordinance. Both the airport and convention entertainment items are expected before council in December/January.
• The cap on right-of-way transfers from water bill revenues was set at 9.5%.

Quarterly Updates on Projected Departmental Overage Related to Overtime

• Police (HPD): Director Debowski and Chief Harden reported that HPD overtime is trending favorably. The FY27 adopted overtime budget was increased to $21 million based on a five-year historical average. Through Q1, actual overtime is $6.7 million. Attrition is under cadet additions; cadet classes total 218, and the department projects adding approximately 158 classified officers this year, similar to last year. Chief Harden confirmed qualification standards have not been lowered. Overtime spikes in July 2026 were attributed to World Cup and July 4th celebrations, with about 32% of overtime reimbursed by airport and Metro. Councilmember Plexinger noted that year-over-year comparisons are not apples-to-apples due to World Cup.
• Fire (HFD): Chief Tom Munoz reported significant improvements. The FY27 adopted overtime budget is $52.6 million (up ~$9 million from FY26 to better reflect actuals). The first quarter shows a 17% decrease in overtime hours compared to the same period last year, attributed to increased staffing. The department is averaging 844 members per shift (up from 817 in FY26). Brownouts (units out of service) dropped from 1,112 in FY25 to 113 in FY26, and to just 1 in Q1 FY27. Cadet versus attrition numbers showed positive net gain of 102 in FY25, 163 in FY26, and a projected 242 in FY27. Chief Munoz noted the department is focusing on paramedic training (from 25 to 200 annually) to reduce burnout. He confirmed minimum staffing of 4 per apparatus is a contractual obligation and NFPA standard, but acknowledged the challenge of using pumpers/ladder trucks for EMS calls and mentioned exploring "squads" and other vehicles (like the "Scorpion") for blocking and alternative responses.

Parks & Open Space Ordinance Update

• Director Kenneth Allen presented the annual report for Chapter 42 (Parks and Private Parks Ordinance). Since inception in 2007, total revenue collected is $104.3 million, total spent is $44.5 million, remaining fund balance is $59.9 million (of which $42.5 million is obligated; $17.4 million unobligated). The fund has supported 114 playground updates, 26 tennis court improvements, 9 pavilion renovations, and acquisition of 114 acres of parkland (64 acres via direct investment of $14 million, 50 acres from developer dedication).
• The department recommends increasing the fee-in-lieu from $700 to $900 per dwelling unit (the state maximum is $1,296; CPI-adjusted would be $1,113; appraised value-based would be ~$1,400). Chair Alcorn noted this is a "modest, gradual approach" and expects annual increases until the maximum is reached.
• The Planning Commission on October 29th supported the recommendation and set a public hearing for November 12th. Implementation is targeted for January 1, 2027. Councilmembers Martinez, Ramirez, and others expressed support, emphasizing the need for ongoing revenue for park maintenance and equity. Chair Alcorn noted that park user fees, many unchanged for decades, may also be adjusted gradually.

P Card Expenditure Trends and Insights

• Deputy Controller Will Jones presented an analysis of the city's purchasing card program. The city spends an average of $24.4 million annually via P-cards, with $122 million spent over the last five years. The general fund accounts for $8.9 million of annual spend; top departments are public works, fleet, fire, airport, parks, police, and health.
• A key observation: clothing category spending increased 61% in FY25 and another 19% in FY26, with 75% concentrated in the fire department due to use of P-cards for the clothing voucher program (on a contract with Galls). Effective this year, such purchases have been moved to purchase orders for better oversight.
• Other issues noted: 83 occurrences of exceeding the $10,000 monthly limit (49 unique card holders); potential split transactions; use of prohibited third-party payment platforms (PayPal, Venmo) in a small number of transactions; and inconsistent general ledger coding. The procurement team (Jed) is consolidating P-card coordinator functions and conducting monthly monitoring.

Audit Division Update

• Deputy Director Jennifer Pierce reported on the audit division's work. Since the last update, four FY26 engagements have been completed; six more are in reporting or field work, due by January. The FY27 plan includes audits of the water utility, SAP segregation of duties, grant management, and HUD grant compliance, plus six follow-up audits.
• Open findings review: Of 211 open audit findings, 148 (70%) are ready for follow-up, 29 are in follow-up now, and 34 are still being remediated. The FY27 plan includes six follow-up audits to address the backlog.
• Follow-up audit of HITS: Reviewed 20 open findings from 2012 (SAP security), 2018 (cloud governance, IT processes). Nine are fully implemented and closed; eleven remain open. Five of six SAP security findings from 2012 remain open, including controls over powerful accounts, locking high-risk transaction codes, and logging changes to protection tables. This is one reason SAP segregation of duties is on the FY27 plan. Other open items include backup restoration testing, cloud governance responsibility chart, and vendor risk assessments.
• Follow-up audit of Library Cash Handling and Building Security (2020/2023): Two findings closed (security cameras at libraries installed, separated employees removed from badging system). Three remain open: two contract security officers lacked required 16 hours of annual training; three of 15 daily activity logs not provided; one exterior door with security deficiencies.
• Main report: Audit of the City's Hiring Process: The audit asked whether hiring followed rules, key controls worked, timeliness compared to peers, and if records support decisions. Key findings:
  • Average time to fill a position improved from 114 business days in FY24 to 42 days in Q3 FY26 (72 days faster, within HR's target). However, this improvement occurred during a hiring freeze that reduced volume ~45%, so sustainability is untested.
  • High-risk findings: (1) No single citywide hiring procedure – requirements scattered across ~20 administrative procedures, executive orders, and policies. (2) Documentation supporting key hiring controls is incomplete or not retained – 8 of 17 controls tested had exception rates of 75% or higher; more than half of hires lacked evidence of minimum qualifications checks; 47% lacked background check documentation.
  • Medium-risk finding: Access to the applicant tracking system (NeoGov) is not adequately controlled – 72 separated employees still had active access; 72 users could both initiate and approve hiring actions. The risk is partially mitigated by single sign-on (terminated employees' global accounts cut off), but the system access should be cleaned.
  • Posting waivers: Of 906 posting waivers, 752 (83%) were for non-executive positions, contrary to policy. Of sampled waivers, 90% lacked approved waiver with justification for non-executive hires. HR agreed with all findings and committed corrective actions by June 2027, including consolidating procedures, implementing a hiring package checklist, new background check vendor (brought in August), and quarterly access reviews.

Key Outcomes

• Next steps on open space ordinance: The Planning Commission will hold a public hearing on November 12, 2026; the fee increase from $700 to $900 per unit is expected to go before City Council and be effective January 1, 2027.
• No votes taken during the committee meeting; items are to proceed to council for action (e.g., TWDB loan resolution, CUS bond items, airport commercial paper, convention entertainment credit, and parks ordinance amendments).
• Overtime monitoring continues: The committee will continue to track HPD and HFD overtime, with the next quarterly update expected. Fire department improvements in reducing brownouts and increasing staffing were commended.
• Audit follow-ups: HR is to implement corrective actions by June 2027; the audit division will verify through follow-up audits. The SAP segregation of duties audit is scheduled for FY27.
• Next committee meeting: Tuesday, December 1, 2026, at 10 a.m.

The meeting was adjourned at 1:13 p.m.