[Budget and Fiscal Affairs]
[00:00:19]
GOOD MORNING.IT IS 10:00 AM I AM VICE MAYOR PRO TEM, DAVE MARTIN, JOINED WITH COUNCIL MEMBER EDWARD POLLARD, VICE CHAIR EDWARD POLLARD.
COUNCIL MEMBER CAROLYN, EVAN SHABAZZ AND STAFF FROM COUNCIL MEMBER CARLOS CISNEROS OFFICE AND DAVID ROBINSON'S OFFICE.
I CALL THIS MEETING TO ORDER AND WOULD LIKE TO WELCOME ALL COUNCIL MEMBERS.
IF THERE ARE ANY MEMBERS OF THE PUBLIC WHO ARE HERE IN PERSON WOULD LIKE TO PARTICIPATE IN PUBLIC COMMENT.
THERE'S A SIGNUP SHEET, THE FRONT TABLE.
MY STAFF MEMBER CAROLINA WILL BE MONITORING THE PUBLIC SPEAKERS LIST.
AT THIS TIME, I WANT TO WELCOME CONTROLLER CHRISTOPHER BROWN AND DIRECTOR TAN EMO TO PROVIDE THE MONTHLY FINANCIAL REPORT.
UM, PLEASED TO PRESENT THE MONTHLY FINANCIAL REPORT FOR THE PERIOD ENDING APRIL 30TH, 2022.
IN THE GENERAL FUND, THE CONTROLLER'S OFFICE IS PROJECTING AN ENDING FUND BALANCE OF 315.5 MILLION FOR FY 22.
THIS IS $10 MILLION LOWER THAN THE PROJECTION OF THE FINANCE DEPARTMENT.
THIS DIFFERENCE IS DUE TO A $10 MILLION LOWER REVENUE PROJECTION THAN FINANCE.
BASED ON OUR CURRENT PROJECTIONS, THE FUND BALANCE WILL BE APPROXIMATELY 148.3 MILLION ABOVE THE CITY'S TARGET OF HOLDING 7.5%.
OUR REVENUE PROJECTIONS INCREASED APPROXIMATELY 15.5 MILLION FROM THE MARCH, 2022 REPORT.
AND THIS IS DUE TO THE FOLLOWING CHANGES.
PROPERTY TAX INCREASED BY 11.1 MILLION, AND THAT WAS DUE TO HIGHER THAN EXPECTED RECEIPTS.
SALES TAX INCREASED BY 7 MILLION, AND THAT WAS DUE TO LARGER RECEIPTS IN PRIOR MONTHS, AND ALSO ADDITIONAL COLLECTIONS EXPECTED FOR THE REMAINDER OF THIS FISCAL YEAR.
AND INCREASES, UH, THESE INCREASES ARE OFFSET BY A DECREASE IN INTERGOVERNMENTAL REVENUE OF 2.6 MILLION, AND THAT WAS DUE TO MUNICIPAL SERVICE FEES TO BE DEDUCTED FROM REVENUES.
COLLECTED EXPENDITURES WERE UNCHANGED FROM THE MARCH 22 REPORT.
AND IF YOU LOOK AT OUR ENTERPRISE FUNDS, UH, ALL OF THE, UH, PROJECTIONS, UH, FOR REVENUES AND EXPENDITURES FOR THE FISCAL YEAR ENDING JUNE 30TH, 2022, REMAIN UNCHANGED, UH, COMPARED TO THE PREVIOUS MONTH.
UM, AND FINALLY, LOOKING AT OUR COMMERCIAL PAPER AND BONDS, ALL OF THE CITY'S, UH, VARIABLE RATE DEBT IS WELL BELOW THE 20% THRESHOLD.
THANK YOU, CONTROLLER, DIRECTOR.
THIS IS THE 10 PLUS TWO FINANCIAL REPORT FOR THE PERIOD ENDING APRIL 30TH, 2022.
THE FISCAL YEAR 2022 PROJECTIONS ARE BASED ON 10 MONTHS OF ACTUAL RESULT IN TWO MONTHS OF PROJECTIONS.
ON THE GENERAL FINAL REVENUE PROJECTION IS 91.6 MILLION HIGHER THAN THE ADOPTED BUDGET, AND 11.1 MILLION HIGHER THAN LAST MONTH'S REPORT.
THE VARIANCE FROM LAST MONTH'S REPORT IS MAINLY DUE TO THE FOLLOWING.
WE REFLECT 13.7 MILLION INCREASE IN THE GENERAL PROPERTY TAX.
THIS IS DUE TO HIGHER THAN ANTICIPATED COLLECTIONS.
SO IF YOU LOOK AT THE YEAR TO DATE, UH, BALANCE AT THIS POINT IN THE REPORT, THIS ALREADY REFLECTED THE, THE TRANSFER OF THE TUR.
SO THIS IS THE, THE TRUE ACTUAL YEAR TO DATE THAT WE HAVE FOR THE PROPERTY TAX.
WE ALSO PROJECT A 2.6 MILLION DECREASE IN THE INTERGOVERNMENTAL CATEGORY.
THIS IS DUE TO LOWER THAN ANTICIPATED TURDS MUNICIPAL SERVICE FEES.
OUR EXPENDITURES PROJECTION IS 33 POINT MILLION HIGHER THAN THE ADOPTED BUDGET AND REMAINS UNCHANGED FROM THE NINE PLUS THREE REPORT.
WE ARE CURRENTLY PROJECTING AN ENDING FUND BALANCE OF 3 25 0.6 MILLION, WHICH IS 58.4 MILLION HIGHER THAN THE ADOPTED BUDGET, AND 14.6% OF THE ESTIMATED EXPENDITURES LESS DEBT SERVICE AND PAY SU GO.
THIS FUND BALANCE IS AT 158.4 MILLION ABOVE THE TARGETED 7.5% OF THE EXPENDITURES, LESS DEBT SERVICE AND PAY SU GO.
WE PROJECT NO CHANGES FROM LAST MONTH FOR LAST MONTH FOR THE ENTERPRISE SPECIAL FUND AND OTHER FUNDS.
WITH THAT, I CONCLUDE MY REPORT.
THERE ARE NO COUNCIL MEMBERS IN QUEUE, SO OUR 10 PLUS TWO LOOKS TO SPEAK FOR ITSELF.
SO I'LL NOW CALL DEPUTY DIRECTOR MELISSA DEBOWSKI TO PROVIDE AN UPCOMING A PRESENTATION ON THE UPCOMING FINANCIAL TRANSACTION AND FINANCIAL DISCLOSURE POLICIES.
[00:05:06]
MR. CHAIRMAN, DID WE NEED, NEED TO MAKE ANY PROCEDURAL MOTION TO ACCEPT? WHAT'S THAT AGAIN? OKAY.I DON'T KNOW IF I HAVE TO PRESS THIS BUTTON ANYMORE.
MY NAME IS MELISSA DEBOWSKI AND I'M HERE THIS MORNING TO PRESENT ON THE UPCOMING FINANCIAL TRANSACTIONS AND THE FINANCIAL DISCLOSURE POLICY.
AND I'M HERE MAKING THIS PRESENTATION ON BEHALF OF THE CITY'S FINANCE WORKING GROUP.
IT'S ON, IT'S ON, CAN YOU SWITCH CHAIRS? YES.
IS THAT, OH, THAT'S MUCH BETTER.
UH, MY NAME IS MELISSA DEBOWSKI AND I'M HERE TO PRESENT ON THE UPCOMING FINANCIAL TRANSACTIONS AND ON THE FINANCIAL DISCLOSURE POLICY ON BEHALF OF THE CITY'S FINANCE WORKING GROUP.
SO ON SLIDE TWO, WE HAVE A, A RECAP OF OUR AGENDA FOR TODAY.
WE HAVE ONE ITEM FOR THE HOUSTON AIRPORT SYSTEM, ONE ITEM FOR THE COMBINED UTILITY SYSTEM, AND ONE ITEM RELATED TO THE GENERAL OBLIGATION CREDIT, AS WELL AS THE UPDATE ON THE FIN FINANCIAL DISCLOSURE POLICY ON SLIDE THREE.
UH, WE'LL TALK ABOUT THE HOUSTON AIRPORT SYSTEM'S SURETY POLICY RENEWAL ITEM.
SO THE AIRPORT SYSTEM, UM, RELATED TO THEIR OUTSTANDING BONDS.
WE HAVE A MASTER TRUST IN DENTURE, AND THAT MASTER TRUST IN DENTURE WITH THE BOND HOLDER STATES THAT WE HAVE TO MAINTAIN A FUND BALANCE, UH, DEBT SERVICE FUND BALANCE FOR OUR OUTSTANDING DEBT.
UM, CURRENTLY THE OUTSTANDING, UM, DEBT, THE DEBT SERVICE FUND REQUIREMENT IS ABOUT $207 MILLION THAT WE HAVE TO MAINTAIN.
UH, CURRENTLY WE MAINTAIN THIS REQUIREMENT BY HAVING A COMBINATION OF CASH AND SOMETHING CALLED SURETY POLICIES.
UH, AND SURETY POLICIES ARE BASICALLY LIKE BOND INSURANCE.
UH, SO ONE OF THE SURETY POLICIES THAT WE HAVE IS, UM, EXPIRING ON JULY 1ST OF THIS YEAR.
AND ONCE THAT SURETY POLICY EXPIRES ARE FUND BALANCE, UM, WILL BE APPROXIMATELY 194 MILLION.
AND THAT WILL LEAVE US A SHORTFALL OF ABOUT $12.8 MILLION.
UH, SO WE'VE RUN SOME ANALYSIS WITH THE ASSISTANCE OF OUR FINANCIAL ADVISOR, MASTERS AND ADVISORS, UH, TO DETERMINE IF IT WOULD BE MORE ADVANTAGEOUS TO EITHER, UM, FUND THE SHORTFALL WITH ANOTHER SURETY POLICY OR IF WE SHOULD FUND IT WITH CASH.
UH, AND BASED ON THE ANALYSIS AND THE RATES THAT WE FEEL WE CAN GET ON THE SURETY POLICIES, UH, IT WOULD BE BEST TO, UM, MOVE FORWARD WITH A NEW SURETY POLICY TO REPLACE THE SURETY POLICY THAT'S EXPIRING.
SO, AGAIN, JUST A REVIEW OF THE POTENTIAL SOLUTIONS.
WE COULD EITHER FUND IT WITH CASH OR ANOTHER SURETY POLICY.
UM, AND SO IN TERMS OF THE NEXT STEPS, WE'RE GOING TO BE, UM, LIKE I MENTIONED WE DID ANALYSIS, BUT WE'RE GONNA BE FURTHER REVIEWING QUOTES, UM, PROVIDED BY SURETY POLICY PROVIDERS.
AND, UH, WE'LL BE PRESENTING AN ITEM TO CITY COUNCIL FOR APPROVAL SOMETIME IN JUNE.
SO, UH, MOVING AWAY FROM THE AIRPORT SYSTEM AND ONTO THE COMBINED UTILITY SYSTEM, AS THE CONTROLLER MENTIONED IN HIS REMARKS.
UM, THE COMBINED UTILITY SYSTEM, LIKE ALL OF OUR CREDITS, UH, OUR VARIABLE RATE EXPOSURE IS, UM, WELL BELOW THE 20% THRESHOLD THAT WE LIKE.
AND ACTUALLY WITH THE COMBINED UTILITY SYSTEM, WE'RE, UM, CURRENTLY AT 0% UNHEDGED VARIABLE RATE DEBT, WHICH IS GREAT.
UM, SO TODAY WE'RE GONNA TALK ABOUT THE HIGHLIGHTED COMMERCIAL PAPER SERIES B FOUR.
UM, THIS COMMERCIAL PAPER SERIES, UH, IS CURRENTLY A HUNDRED MILLION DOLLARS IN SIZE, AND WE HAVE IT WITH, UM, PNC BANK.
AND AS YOU CAN SEE ON THE HIGHLIGHTED ROW, IT'S EXPIRING ON JULY 12TH.
SO ON SLIDE SIX, UH, WE USE THESE COMMERCIAL PAPER PROGRAMS AS A COST EFFECTIVE WAY TO PROVIDE INTERIM FUNDING TO SUPPORT THE CITY'S CAPITAL IMPROVEMENT PLAN.
UM, SO THE WAY IT WORKS IS WE TYPICALLY ISSUE COMMERCIAL PAPER TO PAY THE INVOICES FOR THE CAPITAL IMPROVEMENT PROJECTS.
AND THEN, UM, APPROXIMATELY EVERY YEAR, YEAR AND A HALF OR SO, WE'LL REFUND THE OUTSTANDING COMMERCIAL PAPER INTO LONG-TERM FIXED RATE DEBT.
UM, SO CURRENTLY THIS, UM, COMMERCIAL PAPER SERIES BEFORE, UH, WE HAVE A LETTER OF CREDIT, LIKE
[00:10:01]
I MENTIONED, WITH PNC BANK, UM, AND THE SIZE IS NOT TO EXCEED A HUNDRED MILLION.SO ON SLIDE SEVEN, UM, THE NEXT STEPS, WE HAVE REACHED OUT TO THE CURRENT LIQUIDITY PROVIDER FOR A RENEWAL PROPOSAL.
UM, AND THE PROPOSAL IS ACTUALLY A, A SLIGHTLY CHEAPER THAN THE RATE WE'RE PAYING NOW.
SO WE'RE RECOMMENDING TO RENEW THE, UH, THE SERIES B FOUR LINE FOR AN ADDITIONAL THREE YEARS.
SO MOVING OFF OF THE COMBINED UTILITY SYSTEM CREDIT AND ONTO THE GENERAL OBLIGATION CREDIT.
UM, THE TRANSACTION RELATED TO GENERAL OBLIGATION CREDIT IS OUR TAX AND REVENUE ANTICIPATION NOTES SERIES 2022.
SO EVERY YEAR YOU MIGHT RECALL, WE SELL TAX AND REVENUE ANTICIPATION NOTES TO HELP US MANAGE OUR CASH DURING THE YEAR.
UM, SO THERE'S A LITTLE BIT OF A MISTIMING BETWEEN WHEN THE CITY'S EXPENDITURES HAPPEN, WHICH IS RELATIVELY EVEN THROUGHOUT THE FISCAL YEAR.
AND WHEN WE RECEIVE OUR REVENUES, WHICH THE MAIN SOURCE IS THE PROPERTY TAXES, AND TYPICALLY THOSE COME IN DECEMBER, JANUARY AND FEBRUARY.
SO USUALLY AROUND, UM, NOVEMBER, DECEMBER, WE GET AT A LOW POINT IN CASH.
SO, UM, WITHOUT THIS TRANS BORROWING IN THE PAST, WE WOULD HAVE SEEN A, UH, SHORTFALL IN CASH.
SO WE WOULD, UM, TYPICALLY ANNUALLY ISSUE THE TAX AND REVENUE ANTICIPATION NOTES TO FILL THAT SHORTFALL AND THEN PAY IT BACK BY THE END OF THE FISCAL YEAR.
SO ON SLIDE NINE, UM, SOMETHING WE ALSO TYPICALLY ASK FOR WHEN WE COME TO COUNCIL FOR APPROVAL IS THE ABILITY TO ISSUE A SUPPLEMENTAL TRANS IN THE CASE OF A, UM, ANY UNEXPECTED EXPENDITURES WE MIGHT HAVE.
UM, AND THE LAST TIME WE DID THIS WAS BACK IN FISCAL YEAR 2009 WHEN WE HAD IKE, AND WE HAD SOME UNANTICIPATED EXPENDITURES THERE.
SO ON SLIDE 10 FOR THE NEXT STEPS, UM, WE'RE CURRENTLY RUNNING THE CASHFLOW ANALYSIS TO DETERMINE THE, UM, SIZING OF THE TRANS, BUT WE'LL BE, UH, PRESENTING THIS ITEM TO CITY COUNCIL FOR AUTHORIZATION.
AND WE'LL, UM, GIVE THE SIZING AT THAT TIME, UM, SOMETIME IN JULY.
AND THEN WE'RE ANTICIPATING THAT WE'LL HAVE A COMPETITIVE SALE IN AUGUST.
AND AT THAT TIME, UM, YOU MIGHT REMEMBER THAT THAT'S WHEN THE CITY CONTROLLER WOULD COME INTO COUNCIL CHAMBERS AND ANNOUNCE THE RESULTS OF THE SALE, THE WINNING BIDS, AND THEN WE'LL PLAN TO CLOSE ON THE TRANSACTION SOMETIME IN AUGUST OR SEPTEMBER.
AND THE LAST ITEM, UM, RELATES TO THE FINANCIAL DISCLOSURE POLICIES.
THIS IS SOMETHING, UM, THAT WE TALK ABOUT EVERY TWO YEARS.
UM, SO YOU'RE PROBABLY FAMILIAR WITH THE CITY'S OVERALL FINANCIAL POLICIES.
UM, AND ONE OF THOSE POLICIES SPECIFICALLY RELATES TO, UM, FINANCIAL DISCLOSURE POLICIES, WHICH IS RELATED TO OUR DEBT ITEMS. UM, SO IT'S ITEM, UM, IN THE FINANCIAL, THE OVERALL FINANCIAL POLICIES, IT'S ITEM K SEVEN.
UM, AND THIS POLICY SAYS THAT AT LEAST EVERY TWO YEARS, THE FINANCE WORKING GROUP SHALL DEVELOP AND UPDATE A WRITTEN DISCLOSURE POLICY CONSISTENT WITH FEDERAL SECURITIES LAW AND THE CITY'S CONTINUING DISCLOSURE UNDERTAKINGS WITH RESPECT TO THE CITY'S OUTSTANDING DEBT.
SO ON SLIDE 12, A LITTLE BIT OF A BACKGROUND.
UM, IT'S THE CITY OF HOUSTON'S OBJECTIVE TO MAKE SURE THAT THESE FINANCIAL DISCLOSURES, UM, ARE ACCURATE AND COMPLY WITH ALL FEDERAL AND STATE SECURITIES LAWS.
AND, UM, WE ALSO WANT TO MAKE SURE THAT WE'RE TIMELY, UM, DISCLOSING ITEMS THAT WE NEED TO DISCLOSE TO BOND HOLDERS.
AND WE ALSO WANT TO, OF COURSE, PROMOTE BEST PRACTICES.
UM, SO WE HAVE A COPY OF THE AMENDED AND RESTATED FINANCIAL DISCLOSURE POLICIES, UM, THAT THE FINANCE WORKING GROUP HAS REVIEWED.
AND THE FINANCE WORKING GROUP IS, UM, IS A, A GROUP OF REPRESENTATIVES FROM DIFFERENT CITY DEPARTMENTS, INCLUDING FINANCE CONTROLLER'S, OFFICE, CITY, LEGAL, AND THEN ALSO THE ENTERPRISE CREDITS, LIKE THE AIRPORT SYSTEM, THE COMBINED UTILITY SYSTEM, AND THE CONVENTION ENTERTAINMENT CREDIT.
AND THEN OF COURSE, WE USE OUR OUTSIDE, UM, ADVISORS TO ASSIST AS WELL OUR, UM, FINANCIAL ADVISORS AND ANY OUTSIDE, UM, EITHER BOND COUNCIL OR DISCLOSURE COUNCIL.
SO, LIKE I MENTIONED, WE HAVE TO, UM, REVIEW THESE AND RECOMMEND UPDATES ONCE EVERY TWO YEARS.
UM, SO IF YOU GO TO SLIDE 13, UM, JUST A LITTLE MORE BACKGROUND, THESE, UM, THE POLICY AND PROCEDURES APPLY TO ALL OF OUR DEBT OFFERINGS, LIKE I MENTIONED, ALL FOUR OF THE CITY'S CREDITS.
UM, AND THEY BASICALLY TELL US, UM, HOW AND WHEN TO MAKE FILINGS WITH OUR REGULATING BODIES.
AND THIS IS, UH, A LIVING DOCUMENT, LIKE I MENTIONED, WE REVIEW IT EVERY TWO YEARS.
UM, AND SO BASED ON THIS MOST RECENT REVIEW THAT WE JUST DID, UM, OVER THE COURSE OF THE LAST COUPLE MONTHS, UM, THE FINANCE WORKING GROUP HAS REVIEWED IT AND HAS DETERMINED THAT WE DON'T NEED ANY UPDATES AT THIS TIME.
THERE HAVEN'T BEEN ANY MAJOR CHANGES TO,
[00:15:01]
UM, FEDERAL SECURITIES REGULATIONS FOR MUNICIPAL DEBT, SO, EXCUSE ME.SO WE'RE RECOMMENDING NO CHANGES AT THIS TIME, BUT IN ACCORDANCE WITH THE POLICY, WE WILL CONTINUE TO MONITOR AND UPDATE AS NECESSARY.
AND THAT CONCLUDES MY PRESENTATION.
THANK YOU, DIRECTOR, VICE CHAIR, ED POLLARD.
AND, UH, THANK YOU MS. DEBOWSKI FOR YOUR PRESENTATION.
JUST WANTED TO GET FURTHER CLARITY AND INSIGHT ON THE FINANCE WORKING GROUP.
UM, HOW OFTEN DO YOU ALL MEET, UH, WHAT'S THE PROCESS FOR UPDATING THE, UM, DISCLOSURE POLICY MM-HMM
AND, UM, HOW LONG DOES THAT TAKE? SURE.
UM, SO WE MEET EVERY TWO WEEKS.
UH, WE HAVE A BIWEEKLY CALL, UM, AND WE HAVE ALL OF THE REPRESENTATIVES FROM, LIKE I MENTIONED, FINANCE DEPARTMENT, CONTROLLER'S, OFFICE, CITY, LEGAL, UM, AND THEN WE HAVE THE REPRESENTATIVES FROM THE HOUSTON AIRPORT SYSTEM COMBINED UTILITY SYSTEM AND THE CONVENTION AND ENTERTAINMENT.
THEY'RE REPRESENTATIVE BY HOUSTON FIRST.
UM, AND THEN WE ALSO HAVE OUR FINANCIAL ADVISORS ON THE CALL AND OUR CO FINANCIANAL ADVISORS AS WELL.
UM, AND SO WHAT WE DO IS WE TALK ABOUT, UH, WHATEVER TRANSACTIONS WE HAVE UPCOMING OR WHATEVER, YOU KNOW, LIKE THESE, UM, COMMERCIAL PAPER FACILITIES, IF THEY'RE EXPIRING, WHAT IS OUR PLAN OF ACTION? UM, AND SO WE MEET EVERY TWO WEEKS.
AND THEN, UM, PERTAINING SPECIFICALLY TO THE FINANCIAL DISCLOSURE POLICIES, WE JUST LOOK AT THAT EVERY TWO YEARS.
UM, SO THIS YEAR, UH, WE STARTED LOOKING AT IT MAYBE AROUND TWO MONTHS AGO.
UM, TALKED ABOUT IT, WE CIRCULATED THE CURRENT COPY OF THE POLICIES, WHICH I CAN, UM, PROVIDE YOU ALL A COPY OF IF YOU'D LIKE.
UM, AND JUST, UH, ESPECIALLY WANTED TO CHECK WITH CITY LEGAL TO MAKE SURE THEY WEREN'T RECOMMENDING ANYTHING, IF THERE WAS ANY CHANGES WITH FEDERAL LAW.
UM, TWO YEARS AGO THERE WERE SOME SIGNIFICANT CHANGES THAT THE SEC MADE, SO WE INCORPORATED THOSE INTO THIS POLICY.
BUT, UM, SINCE THEN THERE HASN'T BEEN ANYTHING MATERIAL.
SO DIRECTOR QUESTION ON THE, THE AIRPORT SYSTEM SURETY MM-HMM
SO MAKE SURE I UNDERSTAND THIS.
WHY ARE WE GOING DOWN THIS PATH? SO THE DEBT SERVICE REQUIREMENT FOR THE AIRPORT IS $207 MILLION.
AND IT'S PRESENTLY COMPRISED OF A COMBINATION OF CASH AND AN INSURANCE POLICY.
SO, BECAUSE THE INSURANCE POLICY, THE SURETY EXPIRES ON JULY ONE, WE'LL REALIZE A SHORTFALL OF ALMOST $13 MILLION.
SO LAST WEEK WE HAD BUDGET AND WE LEARNED ABOUT A LOT OF CASH IN THE HOUSTON AIRPORT SYSTEM.
BUT YET WE'RE, WHO IS OUR FINANCIAL ADVISOR ON THIS? MASTERSON ADVISORS MASTERSON.
SO YET WE'RE NOT GONNA USE CASH.
WE'RE GONNA PLACE ANOTHER INSURANCE POLICY, ANOTHER SURETY BOND FOR THREE YEARS.
WHEN WHAT I HEARD LAST WEEK IS WE HAVE A LOT OF CASH TO THE TUNE OF OVER A BILLION DOLLARS SITTING IN THE AIRPORT.
SO I GET FINANCIAL ADVISORS, THEY'RE GONNA MAKE MONEY ON THIS, BUT HOW MUCH IS THAT GONNA COST US FOR THE 12,000,007 VERSUS JUST USING OUR CASH? AND WHY WOULDN'T WE DO THAT? MM-HMM
SO, UH, WHEN THEY DO THEIR ANALYSIS, UM, THEY LOOK AT WHAT THE SURETY POLICY WOULD COST US VERSUS WHAT, UM, MAYBE POTENTIALLY LOST INTEREST EARNINGS WE COULD HAVE ON THE CASH THAT WE HAVE.
AND THEY RUN AN ANALYSIS THERE.
UM, SO I COULD FOLLOW UP WITH YOU ON MORE DETAILS, BUT THEY'RE BASICALLY COMPARING THE, THE COST OF USING YOUR CASH VERSUS THE COST OF THE SURETY POLICY.
SO, CAN I SEE, CAN WE SEE THE ANALYSIS BEFORE WE VOTE ON THIS TOMORROW? IF SO, THIS IS NOT, UH, IT'S GONNA COME FOR YOU FOR A VOTE, UM, SOMETIME IN JUNE.
WE DON'T HAVE A DATE, YOU'RE RIGHT.
BUT YES, WE'LL DEFINITELY PROVIDE THAT AHEAD OF TIME.
BECAUSE I LOOK AT IT AND BASED UPON WHAT I HEARD LAST WEEK, THE AIRPORT HAS THE ADVANTAGE OF A LOT OF CASH, BUT THERE'S A $13 MILLION SURETY.
WHY WOULDN'T WE TRY AND REDUCE THE DEBT SERVICE OF THE AIRPORT? BUT WE, WE CONTINUE TO TAKE ON MORE DEBT AND, YOU KNOW, DEBT'S A FOUR LETTER WORD.
I DON'T THINK IT'S A BAD FOUR LETTER WORD.
IT DEPENDS ON INTEREST RATES AND THINGS LIKE THAT.
UH, WE HAVE GOOD INTEREST RATES TODAY, BUT I'D LOVE TO SEE THE FINANCIAL, UM, ANALYSIS THAT, UM, THAT MASTERSON DID ON THIS.
AND THERE ARE NO OTHER QUESTIONS, SO I GUESS WE'LL MOVE ON TO THE CITY OF HOUSTON OVER 65 DISABLED EXEMPTION UPDATE.
[00:20:01]
TODAY, UH, I'M HERE TO PRESENT ON THE OVER 65 AND DISABLED EXEMPTION UPDATE FOR THE CITY OF HOUSTON ON SLIDE TWO.UM, JUST A LITTLE BIT OF BACKGROUND ON HOW THE, UM, PROPERTY OWNERS, UM, BILLS ARE CALCULATED.
SO THE PROPERTY OWNERS' BILLS PAY THEIR TAXES BASED ON THE CITY'S ADOPTED TAX RATE, WHATEVER IT MIGHT BE IN AN APPLICABLE YEAR TIMES THEIR TAXABLE VALUE.
AND THE TAXABLE VALUE IS CALCULATED BASED ON TAKING THE APPRAISED VALUE THAT THE, UM, APPRAISAL DISTRICT SET MINUS WHATEVER APPLICABLE EXEMPTIONS THERE ARE FOR THEIR INDIVIDUAL ACCOUNTS.
SO CURRENTLY THE CITY OF HOUSTON HAS AN OVER 65 AND DISABLED EXEMPTION OF $160,000.
UM, THIS EXEMPTION APPLIES TO APPROXIMATELY 130,000 ACCOUNTS IN THE CITY OF HOUSTON THAT CURRENTLY QUALIFY FOR THE OVER 65 DISABLED EXEMPTION.
OF THOSE 130,000 ACCOUNTS, UM, APPROXIMATELY HALF OR ABOUT 70,000 ACCOUNTS CURRENTLY HAVE A ZERO TAX BILL FOR THE CITY OF HOUSTON DUE TO OUR 20% HOMESTEAD EXEMPTION, UH, PLUS THE 160,000 EXEMPTION.
SO, UM, BASED ON THE, UH, INCREASE THAT WE'RE GONNA RECOMMEND, WE, UM, BELIEVE THAT THE, OR BASED ON OUR ANALYSIS SHOWS THAT THE REMAINING HALF OF THE ACCOUNTS ARE ABOUT 60,000 ACCOUNTS WOULD SEE SOME ADDITIONAL SAVINGS ON THEIR CURRENT TAX BILL.
UM, DUE TO THIS, UM, RECOMMENDED CHANGE.
SO ON SLIDE THREE, UM, WE'RE RECOMMENDING TO INCREASE THE OVER 65 DISABLED EXEMPTION FROM $160,000 TO $260,000.
UH, SO BASED ON THIS, UM, THE HOMEOWNER SAVINGS ON A $300,000 HOME WOULD SAVE AN APPROXIMATELY ADDITIONAL, UH, $440 PER YEAR.
AND THIS IS BASED ON THE ANALYSIS WE DID IS BASED ON THE CITY'S, UM, CURRENT TAX RATE.
SO ON SLIDE FOUR, YOU CAN SEE A LITTLE BIT OF BACKGROUND ON WHAT THE CITY'S OVER 65 AND DISABLED EXEMPTION HAS BEEN, UM, GOING BACK TO 2006.
AND YOU CAN SEE THAT WE'VE, UH, WE'VE INCREASED THE EXEMPTION OVER TIME.
UM, THE LAST TIME WE INCREASED IT WAS BACK IN FISCAL YEAR 2016.
AND ON SLIDE FIVE, UM, JUST IN TERMS OF, YOU KNOW, LOOKING BACK AT THE HISTORY AND WHY WOULD WE WANNA, UM, INCREASE THE OVER 65 DISABLED EXEMPTION AT THIS POINT, UM, AS I'M SURE A LOT OF YOU HAVE, HAVE HEARD IT'S BEEN IN THE NEWS, UM, VALUES ARE RAISING AT RECORD, UH, RECORD RATES.
UM, AND SO WHAT WE WANNA DO, AND IT'S, IT'S A LITTLE BIT, UM, YOU KNOW, WHAT YOU HEAR IN THE NEWS IS MORE SO RELATED TO THE MARKET VALUE INCREASING.
UM, SO WE CAN'T AT THE CITY CONTROL THE MARKET VALUE OF THE PROPERTIES, BUT WHAT WE CAN HELP WITH IS THE TAXABLE VALUE OF THE PROPERTIES.
SO WHILE THE AVERAGE HOME, UM, ACCORDING TO THE HARRIS COUNTY APPRAISAL DISTRICT, THE AVERAGE HOME HAS INCREASED ABOUT 15 TO 30% ON A MARKET BASIS.
UM, WE CAN PROVIDE SOME RELIEF TO HOMEOWNERS ON THEIR TAXABLE VALUES.
UM, SO YOU ALSO KNOW THAT EVERYONE IS FACED RIGHT NOW WITH INCREASING COSTS OF, OF EVERYTHING BASED ON THE HIGH INFLATION.
UM, AND SO THIS IS SOMETHING THAT WE CAN DO TO ASSIST THE, THE CONSTITUENTS WITH THEIR TAX BILL.
SO IN THE LAST BULLET POINT, IT'S REALLY IMPORTANT TO NOTE THAT THERE WON'T BE ANY IMPACT TO THE FISCAL YEAR 2023 PROPOSED PROPERTY TAX REVENUE BUDGET BASED ON THIS, UM, CHANGE.
AND ON THE, THE LAST SLIDE, SLIDE SIX, JUST GOING OVER THE TIMELINE, UM, WHICH IS PRELIMINARY AT THIS POINT, UM, WE DID BACK IN APRIL RECEIVE A PRELIMINARY CERTIFIED ESTIMATE FROM THE APPRAISAL DISTRICTS, WHICH SHOWED AN ESTIMATED APPROXIMATELY 9% TAXABLE VALUE INCREASE.
SO, LIKE I MENTIONED EARLIER ON, WHILE THE MARKET VALUE'S INCREASING BY 15 TO 30%, THE TAXABLE VALUE INCREASING, UM, STILL QUITE HIGH, BUT NOT AS HIGH AS THE MARKET VALUE AT ABOUT A RATE OF 9%.
UM, AND THEN, SO THAT WAS ON APRIL 28TH, WE RECEIVED THAT INFORMATION.
SO, UM, TODAY I'M HERE PRESENTING ON OUR RECOMMENDATION TO, UH, TO MAKE THE INCREASE.
AND ON JUNE 8TH, WE'LL ASK FOR CITY COUNCIL'S APPROVAL ON THAT INCREASE TO THE OVER 65 DISABLED EXEMPTION FROM ONE 60,000 TO 260,000.
UM, THIS, UM, RECOMMENDED INCREASE WOULD GO INTO EFFECT FOR THE BILLS THAT THE PROPERTY TAX OWNERS ARE GONNA RECEIVE IN NOVEMBER.
AND SO IN ORDER FOR IT TO BE REFLECTED ON THOSE NOVEMBER BILLS, UM, WE, UM, NEED TO SUBMIT THE APPROVED ORDINANCE TO THE THREE APPRAISAL DISTRICTS, UM, BY JULY 1ST.
AND THEN ON JULY 25TH IS WHEN WE ANTICIPATE TO RECEIVE THE CERTIFIED ESTIMATE FROM THE APPRAISAL DISTRICTS.
AND AT THAT POINT, WE'LL BEGIN OUR TRUTH AND TAXATION PROCESS, UM, TO SET THE TAX RATE.
[00:25:01]
AND THAT CONCLUDES MY PRESENTATION.THANK YOU, VICE CHAIR, ED POLLARD.
THANK YOU FOR YOUR PRESENTATION.
UM, DO YOU KNOW WHAT THE RATIONALE WAS WHEN CHOOSING 260,000 AS THE AMOUNT? CAN YOU TELL ME? SURE.
UM, SO THE RATIONALE THERE IS, UM, BASED ON THE, UM, AVERAGE, UH, HOME VALUE FOR PEOPLE THAT HAVE RESIDENCE HOMESTEAD, UH, EXEMPTIONS.
SO RIGHT NOW, THE AVERAGE VALUE IS AROUND $300,000.
UM, AND IF YOU, UH, ASSUME THAT EVERYONE THAT HAS A RESIDENCE HOMESTEAD EXEMPTION IS GONNA GET A 20% EXEMPTION FOR THEIR RESIDENCE HOMESTEAD, SO ONCE YOU SHAVE OFF THAT 20%, UM, YOU GET TO AROUND APPROXIMATELY $260,000.
SO IF WE HAD THIS EXEMPTION IN PLACE FOR FISCAL YEAR 21 OR 22, UM, HOW MUCH LESS TAX REVENUE WITH THE CITY HAVE NOT RECEIVED? WE HAVEN'T DONE THAT CALCULATION.
WE WOULD HAVE TO GO BACK AND LOOK.
IT, IT'S, UM, IT WOULD HAVE, UH, REDUCED OUR TAXABLE VALUE ON A CITYWIDE BASIS.
UH, SO IT, IT PROBABLY WOULD HAVE REDUCED OUR TAX REVENUE LAST YEAR, BUT SINCE WE'RE ANTICIPATING THIS HUGE GROWTH IN, UM, TAXABLE VALUE, THAT'S WHY WE'RE NOT ANTICIPATING A REDUCTION IN PROPERTY TAXES THIS YEAR.
SO EVEN WITH THIS EXEMPTION, SINCE THE, THE VALUE OF PROPERTIES IS RISING AND WE GET A PERCENTAGE OF THE APPRAISED VALUE OF A PROPERTY THIS EXEMPTION SHOULD NOT FINANCIALLY, UM, PUT US BEHIND.
JUST A FOLLOW UP TO VICE CHAIR'S QUESTION.
SO, UM, HOW DOES THIS AFFECT OUR PROPERTY TAX REVENUE CAP? IS, DOES THIS GIVE US A LITTLE BIT OF WHAT I WOULD CALL A HEDGE ON IT? SO THE CAP, UM, IS A LIMITATION ON REVENUE, RIGHT? NOT ON VALUE GROWTH, RIGHT? SO THE MORE OUR TAXABLE VALUES GROW, UM, WE'RE NOT AT THE CITY FULLY ABLE TO TAKE, UM, FOR LACK OF A BETTER WORD, TAKE ADVANTAGE OF ALL THAT TAXABLE VALUE GROWTH BECAUSE WE'RE LIMITED ON OUR REVENUE AMOUNT.
SO, UM, WHEN WE'RE ANTICIPATING THIS VERY HIGH TAXABLE VALUE GROWTH, UH, THIS WILL REDUCE THE CITY'S OVERALL TAXABLE VALUE, BUT STILL BRING IN THE SAME AMOUNT OF REVENUE.
WITHOUT THIS EXEMPTION, WOULD WE HAVE TO LOWER THE TAX RATE EVEN MORE DUE TO THE STIPULATIONS OF THE PROPERTY TAX REV? YES.
THAT'S WHAT I, SO I WOULD ENVISION THIS AS A LITTLE BIT OF A HEDGE STRATEGY.
IT'S A, I THINK IT'S A GREAT MOVE GIVEN THE CONDITIONS OF WHAT THE CITY OF HOUSTON FACES AS COMPARED TO OUR COUNTERPARTS IN DALLAS AND SAN ANTONIO AND AUSTIN.
AND THE MORE, UM, I'M NOT SURE IF EGREGIOUS IS THE WORD, BUT THE, THE STIPULATIONS THAT WE'RE UNDER WITH OUR MORE STRINGENT PROPERTY REVENUE CAP.
I THINK THIS MAKES A LOT OF SENSE BECAUSE ANYTHING YOU CAN DO TO LOWER THE OBLIGATION OF FOLKS OVER 65, UH, THE BETTER SERVED WE WOULD BE, UH, WHERE WE DON'T REALLY HAVE THAT SIGNIFICANT DIFFERENCE OF THE MONEY THAT IS COMING INTO THE CITY.
IF I SAID THAT CORRECTLY, YES.
THAT'S A GOOD USE OF A HEDGE, RIGHT? LIKE YOU SAID, WE'RE NOT, UM, IT'S NOT GOING TO IMPACT THE RIGHT AMOUNT OF REVENUE WE'RE GONNA BRING IN, RIGHT? BUT IT CAN HELP THE CONSTITUENTS AT THE SAME TIME, BUT IT'LL AFFECT THE TAX RATE.
SO MANY PEOPLE MAY NOTICE THAT THERE'S A LOT, THIS WILL BE THE FASTEST AND REALLY NOT MANY QUESTIONS ASKED.
THE REASON WHY IS BECAUSE WE HAD AIR CONDITION ISSUES AND WE DID NOT SET UP THIS MEETING AS A HYBRID MEETING.
SO COUNCIL MEMBERS ARE ATTENDING, FOR INSTANCE, I KNOW THAT COUNCIL MEMBER ALCORN AND COUNCIL MEMBER PECK ARE WATCHING IT VIA HTV, BUT SINCE WE HAD THE AIR CONDITION ISSUES, A LOT OF FOLKS ARE NOT IN THE ANNEX TODAY AND ARE WAITING FOR THE TEMPERATURES TO GET PROBABLY A LITTLE BIT BELOW 85, WHICH WE WERE, THEY WERE THIS MORNING.
SO QUITE UNCOMFORTABLE FOR PEOPLE TO WORK IN THAT ENVIRONMENT AND A LOT OF 'EM ARE CHOOSING TO WORK, UH, AT HOME TODAY.
SO THAT'S WHY YOU DON'T SEE ANYONE OTHER THAN THREE OF US HERE TODAY, UH, FROM COUNCIL AND A NUMBER OF COUNCIL STAFF.
BUT, UH, WE HOPE TO HAVE THAT RECTIFIED BY THIS AFTERNOON.
SO EVERYBODY GET BACK INTO THE OFFICE THEN.
UH, BEFORE WE ADJOURN, PLEASE NOTE THAT THE NEXT SCHEDULED BFA COMMITTEE MEETING IS A SPECIAL CALL BUDGET AND FISCAL AFFAIRS COMMITTEE WHERE THE FISCAL YEAR 2023 CIP CAPITAL IMPROVEMENT
[00:30:01]
PROJECT PLAN WILL BE PRESENTED THE WEEK OF JUNE 13TH.WE WILL UPDATE YOU WITH DETAILS ONCE THE OFFICIAL DATE HAS BEEN CONFIRMED.
IF THERE ARE NO OTHER QUESTIONS OR CONS OR COMMENTS FROM COUNCIL MEMBER, THIS MEETING IS ADJOURNED.