[Budget and Fiscal Affairs on May 25, 2023.]
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THE FISCAL AFFAIRS COMMITTEE, AND I CALLED THIS MEETING TO ORDER.I WOULD LIKE TO WELCOME ALL COUNCIL MEMBERS IN ATTENDANCE, WHICH IS ME AND VIRTUALLY.
UH, WE HAVE COUNCIL MEMBER CAROLYN EVAN SHABAZZ, AND, UH, CHAIR DAVE MARTIN.
WE ALSO HAVE STAFF FROM COUNCIL MEMBER ABBY CAYMAN, UH, CA STAFF FROM MARY ANN HUFFMAN, CARLOS CISNEROS, MIKE KNOX, DAVID ROBINSON, AND LETITIA PLUMMER.
IMMEDIATELY FOLLOWING TODAY'S SPECIAL CALL, BFA, THE FISCAL YEAR 2024.
BUDGET WORKSHOPS WILL BEGIN WITH THE FINANCE DEPARTMENT, SORRY, CONTROLLER CONTROLLER'S TRENDS REPORT.
ALRIGHT, CONTROLLER TRENDS CONTROLLER.
THE CONTROLLER TRENDS REPORT WILL, UH, START OFF TODAY AT 9:00 AM AND ALL BUDGET WORKSHOPS WILL BE POSTED ON THE BFA WEBSITE.
AND TODAY IS THE LAST DAY OF THE BUDGET WORKSHOPS.
A PUBLIC SPEAKER'S LIST HAS BEEN PROVIDED TO EACH COUNCIL MEMBER FOR TODAY'S PRESENTATIONS.
HOWEVER, IF THERE ARE ADDITIONAL MEMBERS OF THE PUBLIC THAT ARE HERE IN PERSON AND DID NOT GET A CHANCE TO SIGN UP BY YESTERDAY'S DEADLINE, THERE'S A SIGN IN SHEET AT THE FRONT TABLE.
MY STAFF WILL BE MONITORING THE PUBLIC SPEAKER'S LIST.
THE MAIN PUBLIC HEARING ON THE FY 24 BUDGET IS EXPECTED TO OCCUR ON WEDNESDAY, MAY 31ST.
DURING OUR REGULARLY SCHEDULED CITY COUNCIL MEETING, CITY COUNCIL MEMBERS SHOULD SUBMIT ANY BUDGET DEPARTMENT WORKSHOP QUESTIONS IN A WORD DOCUMENT AND UPLOAD IT TO THE SHAREPOINT BUDGET WORKSPACE.
OVER THE LAST TWO WEEKS, THE DISTRICT E STAFF HAS SHARED LINKS TO THE SHAREPOINT BUDGET WORKSPACE, AND HELD A REFRESHER TRAINING TO MAKE SURE COUNCIL OFFICES ARE PREPARED FOR THE BUDGET SEASON.
ALL PRESENTATIONS FOR BUDGET WORKSHOPS WILL BE POSTED ON SHAREPOINT 48 HOURS BEFORE THE DAY OF THE DEPARTMENT'S WORKSHOP AND DELIVERED TO COUNCIL INBOXES IN THE ANNEX LOBBY.
PLEASE MAKE SURE YOUR STAFF IS UTILIZING THE WORKSPACE AND PICKING UP THEIR DEPARTMENT PRESENTATIONS IN YOUR MAILBOXES IN A TIMELY MANNER.
THESE PRESENTATIONS WILL THEN BE UPLOADED TO THE BFA WEBSITE DEPARTMENTS HAVE BEEN DIRECTED TO PROVIDE RESPONSES WITHIN 48 HOURS OF THE CONCLUSION OF THEIR PRESENTATION TO ANY QUESTIONS POSTED BEFORE THE START OF THE WORKSHOP.
DEPARTMENT RESPONSES WILL ALSO BE UPLOADED TO THE SHAREPOINT FOR ALL COUNCIL MEMBERS TO REVIEW.
IF QUESTIONS ARE SUBMITTED AFTER THE PRESENTATION, DEPARTMENTS HAVE 48 HOURS TO RESPOND VIA SHAREPOINT FROM THE BEGINNING, FROM THE TIME OF POSTING.
QUESTIONS FROM COUNCIL MEMBERS CAN BE UPLOADED AT ANY TIME DURING THE BUDGET WORKSHOP PROCESS.
THE EARLIER THE BETTER, ALLOWING THE DEPARTMENTS PLENTY OF TIME TO PROVIDE RESPONSES.
PUBLIC SPEAKERS SHOULD HAVE SIGNED UP ONLINE BY 3:00 PM YESTERDAY.
THE FISCAL 2024 BUDGET AMENDMENT TEMPLATE HAS ALSO BEEN UPLOADED TO THE SHAREPOINT BUDGET WORKSPACE.
MAYOR TURNER SENT OUT A MEMO TO ALL COUNCIL MEMBERS AND COUNCIL OFFICES TO ENSURE PRODUCTIVE DISCUSSIONS ON THE FY 2024 PROPOSED BUDGET RELATED TO COUNCIL MEMBER AMENDMENTS.
PER HIS MEMO, ONLY OPERATING OPERATION BUDGET RELATED AMENDMENTS WILL BE CONSIDERED.
POLICY AMENDMENTS SHOULD NOT BE SUBMITTED AND WILL BE RULED OUT OF ORDER.
PLEASE SEE MAYOR'S, THE MAYOR'S MEMO FOR ADDITIONAL GUIDANCE.
I ENCOURAGE ALL COUNCIL MEMBERS TO REACH OUT DIRECTLY TO THE MAYOR IN AN EFFORT TO MAKE SURE THEIR AMENDMENTS ARE SUCCESSFUL, OR YOU CAN WORK WITH THE MAYOR TO IDENTIFY A PATH FORWARD.
AMENDMENTS ARE DUE BY WEDNESDAY, MAY 31ST.
I WANT TO WELCOME CITY OF HOUSTON CONTROLLER CHRIS BROWN, TO PROVIDE THE FISCAL YEAR 2024 SPECIAL CALL BFA COMMITTEE MEETING CONTROLLER'S, TRENDS REPORT CONTROLLER, THE FLOOR IS YOURS.
THANK YOU, MR. VICE CHAIR, COUNCIL MEMBERS AND STAFF.
I'M PLEASED TO PRESENT THE TRENDS REPORT FOR FISCAL YEAR 24.
UH, AT THE TIME OF THIS REPORT, UH, THE CITY HAS BENEFITED FROM ROBUST SALES TAX GROWTH, LARGELY THE RESULT OF STIMULUS AND FEDERAL RECOVERY FUNDING IN HOUSTON.
THE RECEIPT OF MORE THAN 1 BILLION IN COVID RECOVERY FUNDING HAS GLUED, UH, OTHERWISE BLEAK FINANCIAL OUTLOOK SEEN
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IN THE, AT THE HEIGHT OF THE PANDEMIC.WE ESTIMATE THE BENEFITS SEEN AS A RESULT OF FEDERAL RECOVERY FUNDING AND STIMULUS, UH, AS TEMPORARY.
THE STRUCTURAL DEFICIT THAT WAS JUST NORTH OF 160 MILLION EXISTED BEFORE COVID AND WILL UNDOUBTEDLY RESURFACE AFTER THE FEDERAL FUND BALANCE, UH, HAS BEEN EXHAUSTED.
SO, UM, AS WE BEGIN THIS PRESENTATION, UH, MY MESSAGE, UH, CONTINUES TO REMAIN CLEAR.
WE STILL HAVE A STRUCTURAL BUDGET DEFICIT, AND WE WILL BE FORCED TO DEAL WITH THAT IN THE FUTURE.
UH, IT'S MY HOPE THAT COUNCIL AND STAFF WILL USE THE FOLLOWING PROJECTIONS TO OBJECTIVELY MEASURE THE NEEDS OF OUR GROWING CITY.
WITH OUR ORGANIZATIONAL FISCAL HEALTH, OUR CITY HAS, UH, A LOT OF POTENTIAL AND ITS IMPERATIVE THAT WE PLAN AHEAD FOR THE EVENTUAL EXPIRATION OF THE FEDERAL FUNDING.
SO, WITH THAT, I'M PLEASED TO PRESENT THE TRENDS REPORT FOR FY 24.
UH, THE CONTROLLER'S OFFICE COMPILED THE INFORMATION ON THE FOLLOWING PAGES TO ASSIST CITY COUNCIL IN PUTTING THE ADMINISTRATION'S FISCAL YEAR 2024 PROPOSED BUDGET INTO A HISTORICAL PERSPECTIVE.
THE TRENDS PRESENTED HERE AND PROVIDE COUNCIL MEMBERS A BROADER PICTURE AND HOPEFULLY HELP IN THE BUDGET DECISION MAKING PROCESS.
FOR THE REMAINDER OF FISCAL YEAR 23, WE EXPECT AN INCREASE OF 2.6% FROM THE FISCAL YEAR 2022 REVENUES IN FISCAL YEAR 24, WE ANTICIPATE REVENUES WILL INCREASE BY 79 MILLION OR 2.86%, AND THAT'S NOT INCLUDING TRANSFERS, SALE OF ASSET OR BUDGET STABILIZATION RESERVES FROM THE CONTROLLER'S OFFICE.
FISCAL YEAR 2023 MARCH PROJECTIONS FISCAL YEAR 2020 FOURS.
PROJECTED REVENUE REFLECTS INCREASES IN PROPERTY TAXES, INDUSTRIAL ASSESSMENTS, OTHER TAXES, ELECTRIC FRANCHISE GAS FRANCHISE CHARGES FOR SERVICES, AND OTHER, UH, ENTERPRISE AND MISCELLANEOUS FUNDS.
UM, WE ANTICIPATE LOWER SALES TAX REVENUE IN FISCAL YEAR 24 COMPARED TO FISCAL YEAR 23.
AND OUR OFFICE WILL CONTINUE, UH, TO MONITOR THE FISCAL 23 ACTUALS AS ADDITIONAL DATA, UH, TO HELP BETTER FORECAST CONSISTENT FY 24 SALES TAX REVENUE.
OUR PROJECTING ENDING FUND BALANCE FOR THE GENERAL FUND FOR FISCAL YEAR 24 IS 311 MILLION OR 12.9% OF THE EXPENDITURES OTHER THAN DEBT SERVICE, UH, WHICH IS REQUIRED ABOVE THE 7.5%, UH, WHICH IS 181 MILLION IN THE ENTERPRISE FUNDS, AVIATION REVENUES ARE INCREASING, AND THAT'S DUE TO ANTICIPATED INCREASES IN SIGNATORY LANDING AND TERMINAL SPACE RENTALS.
UH, CONVENTION AND ENTERTAINMENT REVENUES ARE ALSO EXPECTED TO BE HIGHER, AND THAT'S DUE TO INCREASED COLLECTIONS OF HOTEL OCCUPANCY TAX AND PARKING FEES.
AND FINALLY, IN THE COMBINED UTILITY SYSTEM, REVENUES ARE EXPECTED TO INCREASE, PRIMARILY DUE TO INCREASES IN WATER AND SEWER RATES AND INFLATION ADJUSTMENTS.
SO, MOVING ON TO THE NEXT PAGE.
SO THIS IS JUST A SUMMARY OF ALL OF THE, UH, GRAPHS, UH, FOR THE INFORMATION THAT WILL PRESENTED GOING FORWARD.
SO, THE GENERAL FUND REVENUES, UH, THE SLIDE SHOWS THE CONTROLLER'S OFFICE GENERAL FUND, CURRENT FY 23 REVENUE PROJECTION AND OUR FY 24 TRENDS PROJECTION, AND THEN ALSO THE HISTORICALS.
UH, GOING BACK TO FY 19, OBVIOUSLY WE CAN SEE, UH, A LOT OF VOLATILITY IN THESE NUMBERS, AND THAT'S MAINLY DUE TO COD, BUT THE TREND HAS BEEN, UH, STEADILY, UH, INCREASING, UH, POST COVID AND THE IMPLEMENTATION OF THE FEDERAL FUNDING.
UH, IN THE GENERAL FUND REVENUES, THE CONTROLLER'S OFFICE IS PROJECTING AN INCREASE IN OUR GENERAL FUND REVENUE OF 79 MILLION OR 2.86% FROM THE MARCH 23 MOFA PROJECTION.
SO THE MAJOR DRIVERS FROM, UH, THIS PROJECTION INCREASE OUR PROPERTY TAXES AND ALSO INCREASES FOR CHARGES FOR SERVICE AND SALES TAX.
WE'VE, UH, ALL SEEN STRONG SALES TAX NUMBERS THAT, UH, FROM MONTH TO MONTH, BUT, YOU KNOW, WE ARE ESTIMATING THAT THIS IS A KIND OF THE TOP OF THE ROLLERCOASTER WHERE, UH, HAVE SEEN INCREASES OVER AND OVER, UH, YEAR OVER YEAR.
BUT, UH, WE BELIEVE THAT THIS IS, UH, TEMPORARY AND AS A RESULT OF, UH, INCREASED INFLATION TIGHTENING, TIGHTENING MONEY, MONETARY POLICY, UH, WANING CONSUMER CONFIDENCE, UH, DWINDLING PERSONAL DISPOSABLE INCOME AND PERSONAL SAVINGS RATES, UH, AND, YOU KNOW, THE INCREASED SPECULATION OF A ECONOMIC CONTRACTION IE RECESSION, THAT WE WILL SEE A DECREASE IN SALES TAX GOING FORWARD.
SO FOR PROPERTY TAX REVENUE, UH, PROPERTY TAX REVENUE FOR FY 24 IS EXPECTED TO BE 8.25% HIGHER THAN FY 23.
UH, MY OFFICE MAKES SEVERAL ASSUMPTIONS IN THIS CALCULATION.
UH, NAMELY THE TOTAL ESTIMATED TAXABLE VALUE OF 313 BILLION PULLED FROM THREE COUNTY APPRAISAL DISTRICTS AND A 97% COLLECTION RATE.
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PROJECTION ACTUALLY EXCEEDS THE, UH, PRELIMINARY PROP ONE CAP OF 1.377 BILLION.SO THAT WILL BE THE MAXIMUM ALLOWABLE, UH, THAT WE CAN TAKE IN IN REVENUE.
THE PROPERTY TAX REVENUE CONTINUES TO BE AN AREA OF INTEREST FOR OUR OFFICE AS WE MONITOR THE EFFECTS OF SB TWO AND PROP ONE HD THIS MORNING, SAYING THAT FOUR, UH, THE CITY IS STILL SUBJECT TO THE PROVISION OF THE SENATE BILL TWO, AND WE BELIEVE THAT THE VARIABLE IN PROP ONE'S METHODOLOGY, THE GROWTH INDEX, HAS THE POTENTIAL TO TRIGGER SB TWO FOR THE FIRST TIME.
SO I WOULD SAY, UH, TAKE HEAT OF THAT, UH, BECAUSE WE MIGHT ACTUALLY HAVE TO ADJUST OUR PROPERTY TAX REVENUES DOWNWARD ONCE WE GET THAT SB TWO CALCULATION.
SO, TAXABLE VALUES BASED ON A PRELIMINARY EXPECTED TAXABLE VALUE FROM THREE APPRAISAL DISTRICTS.
THE CONTROLLER'S OFFICE PROJECTS AN 8.45% INCREASE IN TAXABLE VALUES IN FY 24, AND THE FINAL TAXABLE VALUES ARE SUBJECT TO CHANGE, WILL BE FINALIZED WHEN THE CERTIFIED ROLES ARE PROVIDED TO THE CITY LATER THIS YEAR.
AS YOU CAN SEE, RESIDENTIAL PROPERTIES MAKE UP 55, UH, 0.2% OF TAXABLE VALUES IN COMMERCIAL MAKE UP 42.2%.
UH, COLLECTIVELY, THE TWO PROPERTY TYPES MAKE UP 97.4 OF TAXABLE PERCENT OF TAXABLE VALUES.
UH, AS YOU CAN SEE, RESIDENTIAL AND COMMERCIAL VALUES WERE EVEN, UH, AND, UH, WERE LAST EVEN IN FY 16.
SO SINCE THEN WE'VE SEEN DISPARITY BETWEEN BETWEEN THE TWO WIDEN.
UH, WE BELIEVE THIS IS A RESULT OF A MORE AGGRESSIVE APPRAISAL PROTEST BY COMMERCIAL PROPERTIES OWNERS AND SIGNIFICANT COMMERCIAL DEVELOPMENT.
AND WE ALSO EXPECT TO SEE CONTINUED WEAKNESS IN THE COMMERCIAL, UH, SIDE FOR VALUATIONS AS THE MARKET DIGESTS, UH, INCREASED RATE RATES.
UH, SALES TAX REVENUE FY 24 SALES TAX REVENUE IS PROJECTED TO DECREASE BY 3.49% FROM FORECASTED FY 23 SALES TAX RECEIPTS.
UH, AS COUNCIL KNOWS, WELL, THIS HAS BEEN THE LARGEST DIFFERENCE IN MY OFFICE'S PROJECTION RELATIVE TO THE ADMINISTRATION.
UH, SALES TAX HAS BEEN VERY DIFFICULT TO ESTIMATE.
UH, WE'VE SEEN A LOT OF VOLATILITY, UM, BUT WE HAVE, UH, SEEN ABOUT A 15% INCREASE YEAR OVER YEAR.
THIS YEAR WE'RE TRACKING, UH, ABOUT 11%.
UH, SO ON AVERAGE, YOU KNOW, ALMOST 13% YEAR OVER YEAR FOR THE LAST TWO YEARS, WE DO BELIEVE THAT THAT IS, UH, NOT SUSTAINABLE.
SO WE ARE ESTIMATING A DECREASE FOR NEXT YEAR.
PAGE NINE, UH, PROPERTY TAX RATE.
THIS CHART SHOWS THE HISTORICAL PROPERTY TAX RATE.
THE FY 24 RATE WILL LIKELY BE LOWER THAN THE FY 23 RATE, BUT WILL BE UPDATED ONCE THE PROP ONE CALCULATION IS FINALIZED.
AND WHEN THE APPRAISAL DISTRICT CERTIFIED ROLES ARE MADE AVAILABLE.
UH, IT'S WORTH NOTING THAT IN UH, FY 17, THIS WAS THE FIRST YEAR, THE CITY HAD TO DECREASE ITS TAX RATE TO MAINTAIN COMPLIANCE WITH PROP ONE.
SO BECAUSE OF THE PROPOSITION ONE REVENUE CAP, UH, AS WE, UH, GET CLOSER TOWARDS HITTING THAT CAP AND HAVE TO, UH, LIMIT THE MAXIMUM AMOUNT OF REVENUE THAT WE'RE HITTING, UH, EVERY YEAR, UH, WE HAVE TO LOWER OUR TAX RATE.
SO THAT'S SOMETHING JUST TO NOTE.
UH, I KNOW A LOT OF PEOPLE ARE OUT THERE AND ALWAYS SAYING, HEY, OUR TAX RATES KEEP GOING UP, KEEP GOING UP WHILE, UH, UH, VALUATIONS FOR APPRAISALS KEEP GOING UP.
AND THE CITY OF HOUSTON, THE TAX RATE, UH, IS ACTUALLY GOING DOWN AND GOING DOWN QUITE SUBSTANTIALLY SINCE WE, UH, 17 STARTED HITTING THAT REV CAP.
UH, THE TOTAL FRANCHISE FEE REVENUE IS PROJECTED TO DECREASE BY 1 MILLION OR 0.68% FROM FY 23.
UH, AS MEMBERS KNOW, TOTAL FRANCHISE REVENUE HAS BEEN TRENDING DOWN IN RECENT YEARS.
UH, WE BELIEVE THAT'S A CUMULATIVE RESULT OF SB 1152 RELATING TO THE TELECOMMUNICATIONS INDUSTRY STATEWIDE, UH, AS WELL AS CONSUMERS BOTH MOVING AWAY FROM LANDLINES AND CUTTING THE CORD, UM, FOR DIGITAL STREAMING INSTEAD OF CABLE AND SATELLITE.
UM, MUNICIPAL COURTS FINES AND FORFEITS ARE EXPECTED TO INCREASE BY 6.4% FOR FY 24, BASED ON EXPECTED INCREASES IN COLLECTIONS, MOVING VIOLATIONS, FEES, AND COURT OPERATIONS REVENUE.
UH, WE DEFINITELY SAW A DECREASE, UH, DUE TO COVID AND PEOPLE NOT BEING ABLE TO BE IN PERSON.
BUT, UH, WE HAVE SLOWLY BEEN INCREASING, UH, SINCE THAT BOTTOM OF COVID FOR MUNICIPAL COURT REVENUE.
BUT HISTORICALLY, UH, SINCE YOU KNOW, FY 15, WE ARE TRENDING DOWN.
UH, GENERAL FUND EXPENDITURE BUDGET.
UH, THE FI 24 GENERAL FUND TOTAL EXPENDITURE BUDGET IS EXPECTED TO INCREASE BY 4.32% OVER FY 23 PROJECTED EXPENDITURES, AND THAT'S AN INCREASE OF 120 MILLION.
AND CIRCLING BACK TO MY INITIAL COMMENTS ABOUT A STRUCTURALLY
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BALANCED BUDGET, IF YOU LOOK AT OUR ESTIMATES OF REVENUE MINUS ONE-TIME FINANCING SOURCES FROM THE PREVIOUS SLIDE, UH, THAT NUMBER IS 2.86%, UH, REVENUE RECEIVED.UH, BUT YET WE'RE, UH, PROJECTED TO SPEND, UH, 4.32% MORE.
SO AGAIN, SPENDING MORE MONEY THAN YOU'RE TAKING IN, IN RECURRING REVENUE.
SO, GENERAL FUND BY PERCENTAGE AND FUNCTION, UH, JUST OUTLINES THE GENERAL FUND.
AND AS YOU CAN SEE, UM, AND WE'RE ALL AWARE, A MAJORITY OF OUR BUDGET IS, UH, PUBLIC SAFETY.
CASH VERSUS, UH, FUND BALANCE.
THE UNASSIGNED FUND BALANCE IS EXPECTED TO INCREASE BY 2 MILLION IN FY 23 AND DECREASED BY 39.3 MILLION IN FY 24.
UH, THE PROJECTED UNASSIGNED FUND BALANCE FOR FISCAL YEARS 23 IS 358 MILLION, AND FOR FY 24 IS 319 MILLION.
UH, ONE TO JUST GIVE CREDIT TO THE ADMINISTRATION BECAUSE THIS BUDGET FOR THE FIRST TIME IN A LONG TIME HAS HAD A, A VERY, UH, SIGNIFICANT INCREASE TO FUND BALANCE, UM, THAT WILL NO DOUBT, UH, LESSEN THE BLOW OF, UM, HAVING TO DEAL WITH INCREASED EXPENDITURES, UH, IN THE FIRST YEARS FOR THE NEXT ADMINISTRATION.
I KNOW WHEN, UM, MAYOR TURNER AND I BOTH, UH, CAME INTO OFFICE IN 2016, WE HAD SOME PRETTY BIG CHALLENGES, UH, RIGHT FROM THE GET GO.
SO I THINK, YOU KNOW, THIS IS A, A DEFINITE, DEFINITE BRIGHT SPOT IN THE BUDGET.
BUT, UH, AGAIN, WE'LL BE TEMPORARY BECAUSE, UH, THE AMOUNT OVER, UH, SEVEN AND A HALF, UH, WILL, YOU KNOW, MAYBE ONE OR ONE AND A HALF YEARS OF CUSHION DEPENDING ON HOW REVENUES GO FORWARD.
BUT AFTER THAT, AND COINCIDENTALLY THAT'S AROUND THE TIMING OF THE FEDERAL FUNDING EXPIRING, THERE'S GONNA BE A LITTLE MORE OF A CHALLENGE IN BALANCING, UH, THE BUDGET.
UH, THE 7.5% FUND BALANCE REQUIREMENT.
THE FY 24 PROJECTED ENDING FUND BALANCE IS EXPECTED TO BE 137 MILLION ABOVE THE REQUIRED 7.5% LESS DEBT SERVICE IN PEGO.
UH, THIS REPRESENTS A FUND BALANCE OF 13.2%.
AND AGAIN, I WOULD SAY, UH, UH, YOU KNOW, THIS IS A, A GOOD NEWS TO HAVE A HIGHER FUND BALANCE, BUT A LOT OF THIS IS A DIRECT RESULT OF, UH, ARPA FUNDING AND BEING ABLE TO USE THAT FOR, UH, REVENUE REPLACEMENT.
SO, UH, ALWAYS GOTTA TAKE INTO CONSIDERATION THE IMPACT OF THE FEDERAL FUNDING ON ON THE BUDGET.
UH, AIRPORT REVENUE AND EXPENSES.
UH, AS YOU ALL KNOW, HS REVENUE WAS SIGNIFICANTLY IMPACTED BY THE PANDEMIC, BUT OUR PROJECTIONS FOR FY 24 CONTINUED TO REFLECT A REBOUND IN BOTH INTERNATIONAL AND DOMESTIC TRAVEL.
UH, IT IS WORTH NOTING ARPA FUNDS ARE CONSIDERED GRANT DOLLARS AND ARE NOT INCLUDED IN THE REVENUE PROJECTIONS.
UH, MY OFFICE IS PROJECTING TOTAL REVENUES FOR AVIATION AND FY 24 WILL REACH 591.4 MILLION.
THAT'S AN INCREASE OF 35.5 MILLION OR 6.4%.
UH, THIS INCREASE IS PRIMARILY ATTRIBUTABLE TO INCREASES IN OPERATING REVENUE BASED ON HIGHER THAN ANTICIPATED SIGNATORY LANDING AND TERMINAL SPACE RENTAL FEES.
UH, EXPENDITURES ARE ESTIMATED, UH, TO BE UP BY 30.3 MILLION OR 9.3% FROM FY 23, UH, AND THAT'S PRIMARILY A RESULT OF AN INCREASE IN PERSONNEL COSTS.
OTHER SERVICES AND CHARGES ARE ESTIMATED TO INCREASE 11.7, AND THAT'S DUE TO CONTRACTUAL SERVICES AND INNER FUND SERVICES.
UH, CONVENTION ENTERTAINMENT, REVENUES AND EXPENSES FOR CONVENTION.
ENTERTAINMENT REVENUES ARE EXPECTED TO INCREASE BY 3.3% OR 3.3 MILLION FOR A TOTAL OF ONE OF 105.7 MILLION.
THE EXPENDITURES ARE EXPECTED TO EXCEED REVENUES BY ROUGHLY 2.5 MILLION, RESULTING IN A DECREASE ENDING IN TOTAL NET POSITION.
UH, CONVENTION ENTERTAINMENT REVENUES, UH, C'S PRIMARY REVENUE SOURCE IS HOTEL OCCUPANCY TAX, WHICH IS REPORTED AS NON-OPERATING REVENUES.
UH, HOT TAX COLLECTIONS ARE PROJECTED TO INCREASE BY 2.3 MILLION OR 2.5% COMPARED TO FY 23 RECEIPTS, AND MY OFFICE IS PROJECTING AN INCREASE IN OPERATING REVENUES BY 10.9% OR 1 MILLION FOR C AND E, LARGELY DUE TO INCREASES IN PARKING REVENUE AS A RESULT OF DOWNTOWN AREA WORKERS AND COMMUTERS RETURNING TO PRE PANDEMIC ROUTINES.
UH, CE EXPENSES, AS I MENTIONED, CE IS PROJECTING A DECREASE OF 3.3% OR 3.7 MILLION
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IN EXPENSES WHEN COMPARED TO FY 23, AND THAT'S PRIMARILY A RESULT OF DECREASES IN TRANSFER TO COMPONENT UNITS.HOWEVER, THIS DECREASES OFFSET BY AN INCREASE IN DEBT SERVICE BY 1.2 MILLION OR UP 3.9% FROM FY 23.
MOVING ON TO THE COMBINED UTILITY SYSTEMS REVENUE AND EXPENSES.
THE CUS REVENUES ARE PROJECTED TO EXCEED EXPENDITURES BY 147.7 MILLION IN FY 24, AND THAT'S UP 11.7% COMPARED TO FY 23.
THE EXPENDITURES ARE EXPECTED TO INCREASE AT A SLOWER RATE RELATIVE TO REVENUE REACHING 140 MILLION UP 9.1% COMPARED TO FY 23.
THE COMBINED UTILITY SYSTEM REVENUES CS CUS, TOTAL REVENUE IS EXPECTED TO INCREASE BY 192 MILLION, PRIMARILY DUE TO INCREASES IN WATER AND SEWER SALES AND INTEREST INCOME.
THIS REPRESENTS AN INCREASE OF 11.7% COMPARED TO FY 23, AND THE INCREASE, HOWEVER, IS ALSO OFFSET BY A 31.9 MILLION DECREASE IN ANTICIPATED IMPACT FEES.
CUS TOTAL EXPENDITURES ARE EXPECTED TO INCREASE BY 140.8 MILLION OR 9.1% DUE TO INCREASES IN OPERATING AND MAINTENANCE COST, AS WELL AS DEBT SERVICE TRANSFERS.
AND THE CHANGES IN OPERATING AND MAINTENANCE EXPENSES REFLECT INCREASES IN PERSONNEL EXPENSES AS THE NUMBER OF FTES IS IS EXPECTED TO INCREASE BY 282.7 TO 2396.9 IN FY 24.
SO WITH THAT, I'M HAPPY TO, UM, TAKE ANY QUESTIONS YOU MIGHT HAVE.
AND I WANNA, UH, THANK YOU AND YOUR ENTIRE STAFF AND TEAM FOR HELPING PUT TOGETHER THIS, UH, REPORT AND PRESENTATION.
UM, SALES TAXES, ALWAYS TRY TO FOCUS ON THAT BECAUSE I THINK THAT'S WHERE WE CAN GET THE MOST, UM, GROWTH THAT ISN'T REGULATED OR, OR CAPPED BY ANYTHING.
WHEN YOU'RE LOOKING AT, UM, SALES TAX NUMBERS, HOW ARE YOU ALL FACTORING IN, UM, THROUGH MAYBE HOUSTON FIRST OR THE SPORTS AUTHORITY, THE DIFFERENT ATTRACTIONS, THE DIFFERENT EVENTS AND CONVENTIONS THAT COME IN? I KNOW WE SPOKE ABOUT HOTEL OCCUPANCY, BUT JUST ABOUT THE OVERALL AMOUNT OF EVENTS, UM, THE OPTIMISM THAT THE DIFFERENT ENTITIES MAY HAVE ON THE AMOUNT OF PEOPLE OR CONVENTIONS OR, OR, OR DIFFERENT SPORTING ATTRACTIONS THAT ARE COMING TO THE CITY OVER THE NEXT YEAR, AND HOW THAT WILL RELATE TO AN INCREASED AMOUNT OF PEOPLE OUT AND ABOUT SPENDING THAT TRANSLATES INTO SALES TAX.
OBVIOUSLY WE HAVE OUR, YOU KNOW, RECURRING, UH, LIVESTOCK SHOWN RODEO AND CONVENTION BUSINESS AND THINGS LIKE THAT.
UM, A MAJORITY OF THE REVENUE THAT'S, UH, GENERATED FROM THAT IS, UH, THROUGH HOTEL OCCUPANCY TAX.
SO THAT DOESN'T, UH, SWEEP, UH, DIRECTLY INTO THE GENERAL FUND.
WE DO GET SALES TAXES, YOU MENTIONED.
UM, AND AS WE SEE CONTINUED INCREASES, AND I KNOW IN TALKING WITH THE, UM, PRESIDENT AND MEMBERS OF HOUSTON FIRST, UM, THEY, UH, YOU KNOW, ARE SEEING AN INCREASE IN CONVENTION BUSINESS.
SO THAT WILL, UH, HELP AS PEOPLE COME.
I THINK THIS IS YOUR POINT, AS PEOPLE ARE COMING TO THE CITY AND CONTINUE TO, UM, SPEND, UH, THAT WILL INCREASE IN DOLLARS, UH, THAT ARE COMING INTO THE CITY THROUGH SALES TAX.
YOU KNOW, WE DO HAVE SOME BIG EVENTS ON THE HORIZON WITH THE, UH, WORLD CUP AND OTHERS.
UM, I THINK THE CHALLENGE, UH, IS THAT, AGAIN, LOOKING JUST FROM A, UM, YOU KNOW, STATISTICAL PERSPECTIVE, UH, WE USUALLY SEE SALES TAX IN A GOOD YEAR INCREASING, UH, AROUND 6%.
UH, THAT'S USUALLY A PRETTY, UM, YOU KNOW, PRETTY AVERAGE, BUT GOOD, UH, INCREASE.
WE'VE SEEN, UH, SALES TAX INCREASING, UH, HIGHER THAN THAT IN THE PAST.
UM, ONLY TO COME BACK DOWN, UH, TO KIND OF THE, THE MEAN, IF YOU WILL, UM, IN SEEING 15% INCREASE YEAR OVER YEAR, UH, LAST YEAR, TRACKING OVER 11%, UH, THIS YEAR.
UM, YOU KNOW, I CONTINUE TO BELIEVE THAT, AND I'VE SAID THIS BEFORE, THE PRINCIPLE OF OF MEAN REVERSION.
SO IF, IF THE MEAN IS SOMEWHERE BETWEEN, YOU KNOW, SIX AND 8%, UH, MOST LIKELY WE'RE GONNA GET BACK DOWN INTO THAT RANGE JUST BECAUSE STATISTICALLY YOU CAN'T KEEP INCREASING, YOU KNOW, 10, 11, 12, 15% A YEAR.
SO I THINK EVEN WITH, UM, AN INCREASE OF, UH, EVENTS AND, AND, UH, PEOPLE SPENDING FROM OUT OF TOWN, UH, WE STILL ANTICIPATE THAT, UH, WE'RE GONNA SEE A DOWNTURN IN SALES TAX.
UM, THERE COULD BE SOME NEW DRIVER THAT HELPS TO BOOST THAT.
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UH, OVERALL, UH, THE TREND IS GONNA BE DOWN FOR THE NEXT COUPLE YEARS.DID YOU HEAR OF ANY, UH, DISCUSSIONS IN THIS, UH, LEGISLATIVE SESSION REGARDING, UM, APPRAISAL RATE CAPS? I KNOW WE ALWAYS TALK ABOUT THE PROPERTY TAX CAP, BUT WHEN YOU TALK ABOUT THE APPRAISALS, I KNOW, UM, CHAIR DAVE MARTIN ALWAYS BRINGS UP THE POINT THAT EVEN THOUGH WE'RE LOWERING OUR TAX RATE EVERY YEAR, PEOPLE ARE STILL PAYING MORE MONEY, UM, YEARLY BECAUSE THEIR, THEIR APPRAISED VALUE OF THEIR HOMES GOES UP SUBSTANTIALLY.
HAVE, DID YOU EVER HEAR OF ANY DISCUSSIONS REGARDING THAT? 'CAUSE I KNOW WE RAISED THIS ISSUE PRETTY LOUDLY LAST YEAR.
HOPING THAT GOING INTO THIS, INTO THE LEGISLATIVE SESSION, YOU KNOW, SOMEONE MAY PICK UP A, A BILL AND KIND OF RUN WITH THAT.
THE, UM, YEAH, THE PROPERTY TAX VALUATIONS CONTINUE TO INCREASE.
UM, I KNOW HAS BEEN A, A DISCUSSION IN THE LEGISLATURE.
I BELIEVE, UM, YOU KNOW, HEARING FROM GOVERNOR GREG ABBOTT TRYING TO CAP, UH, ESPECIALLY FOR HOMESTEADED PROPERTIES, UH, LOWER THE CAP, UH, CURRENTLY AT 10%.
I DON'T KNOW THAT THEY'VE, UH, MADE PROGRESS ON THAT FRONT.
I KNOW THE SESSION IS, IS WRAPPING UP.
UM, I WOULD DEFER THAT TO THE GR TEAM HERE IN THE CITY 'CAUSE THEY PROBABLY ARE MORE IN TUNE TO WHAT'S, UH, GOING ON.
BUT I, I WILL SAY, YOU KNOW, WHAT WE'VE USED HERE SUCCESSFULLY IN THE CITY IS, UH, EXEMPTIONS, SENIOR EXEMPTIONS AND CONTINUING TO INCREASE, UH, THOSE EXEMPTIONS FOR PEOPLE, UM, YOU KNOW, THAT ARE OVER 65 AND OTHERS, UH, TO HELP, UH, OFFER SOME PROPERTY TAX RELIEF.
BUT IT'S A DOUBLE-EDGED SWORD BECAUSE, UH, FOR EVERY DOLLAR THAT WE'RE EXEMPTING, UM, FOR THE MOST PART, UH, THERE ARE SOME NUANCES WITH THE PROP ONE REVENUE CAP.
BUT, UM, FOR, UM, YOU KNOW, AN AVERAGE, IF WE WERE TO CAP, UH, THOSE, UH, VALUATIONS FOR HOMESTEAD FROM 8% SAY DOWN TO, UH, I'M SORRY, FROM 10% DOWN TO 8%, YOU KNOW, POTENTIALLY THAT'S, UH, LESS MONEY, UH, THAT THE CITY WOULD BE, UH, GETTING IN, IN VALUE.
NOW AGAIN, WE HAVE A REVENUE CAP, SO IT MAY NOT ACTUALLY TRANSLATE TO DOLLAR FOR DOLLAR BECAUSE WE'RE, YOU KNOW, BASICALLY GETTING HIT WITH A CAP EVERY YEAR.
UH, PAGE 12, REALLY QUICK, I JUST WANT YOU TO ELABORATE A LITTLE MORE ON, UM, THE TOTAL EXPENDITURE BUDGET IS EXPECTED TO INCREASE BY 120 MILLION MM-HMM
UM, KIND OF TO WALK US THROUGH YOU ALL'S, UH, CALCULATIONS ON THAT.
YEAH, WELL, A MAJORITY OF THAT AS, UH, YOU ALL RECALL, UH, THERE WERE SOME, UM, AGREEMENTS MADE WITH POLICE UNION AND FIRE ON, UM, SALARY INCREASES.
AND, UH, THEY WERE ROLLING OVER THREE YEARS, BUT NOW WE'RE IN THE THIRD YEAR.
SO WE'RE SEEING THE FULL IMPACT OF THAT.
SO WHERE THERE ARE POTENTIAL BUDGET CUTS IN MAYBE VACANT, UH, POSITIONS OR THINGS LIKE THAT, OR REDUCTIONS IN CERTAIN AREAS, THAT SALARY PORTION CONTINUES TO RISE AND THE FULL, UM, FULL AMOUNT FOR, FOR THIS YEAR.
UM, YOU KNOW, WE WILL END UP BEING A ABOUT 150 MILLION.
SO WE'RE, WE'RE SEEING THAT, UH, THE BUDGET, UH, CONTINUING TO INCREASE BY 120 MILLION.
AND THAT'S, UH, AGAIN, AS I REFERENCED, UH, 4.32%, YOU KNOW, LOOKING AT, UH, THE, UM, REVENUE PROJECTION INCREASE WHEN YOU EXCLUDE, UH, ONE TIME FINANCING SOURCES LIKE FEDERAL FUNDS AND SALE OF ASSETS AND THINGS LIKE THAT.
UM, THE REVENUES ARE ONLY GROWING AT 2.86%.
SO I THINK, YOU KNOW, THIS IS HIGHLIGHTING THE CONTINUED, UH, DISCUSSION THAT I, UH, SAID OVER AND OVER.
UM, YOU KNOW, YOU REALLY CAN'T SPEND MORE MONEY THAN YOU'RE TAKING IN, IN REVENUE.
AND IF YOU CAN, UH, EVENTUALLY, UM, YOU KNOW, THAT CATCHES UP WITH YOU.
SO, UM, WE'VE BEEN ABLE TO DO THAT, UM, YOU KNOW, THROUGH MAJORITY OF MY, UH, TWO TERMS ON A CITY COUNCIL MEMBER, BUT I'M SORRY, AS CITY CONTROLLER AND YOU ALL AS COUNCIL MEMBERS.
UM, BUT REALLY THAT'S BEEN MADE POSSIBLE BECAUSE OF FEDERAL FUNDING, UH, AND BECAUSE OF, YOU KNOW, STIMULUS MONEY THAT'S BEEN PUMPED INTO THE ECONOMY, THAT'S, YOU KNOW, KIND OF BROUGHT THE ECONOMY ROARING BACK TO LIFE.
SO, UM, I WOULD SAY, UH, THAT THIS IS REALLY THE, THE CHALLENGE, UH, FOR THIS BODY GOING FORWARD AND FOR THE NEXT ADMINISTRATION IS THESE NUMBERS NEED TO BE INVERTED.
SO WE NEED TO BE, UH, ESSENTIALLY SPENDING 2.86% AND ESTIMATING 4.32% IN REVENUE.
AND WE NEED TO, YOU KNOW, PROBABLY DO THAT FOR A PERIOD OF, UM, YOU KNOW, AT LEAST, UH, FOUR OR FIVE YEARS, UH, TO GET THOSE NUMBERS BACK INTO LINE SO THAT WHEN THE FEDERAL MONEY, UH, EXPIRES, THERE'S NOT A, UH, FISCAL CLIFF FOR A HARD LANDING.
SO WE, WE DESIGN A, A SOFT LANDING IS A TERM THAT THE ECONOMISTS
[00:30:01]
LIKE TO USE.WELL, I KNOW YOU HAD MENTIONED EARLIER THAT, UH, YOU WERE GIVING PROPS TO THE, UH, TO THE MAYOR AND THE ADMINISTRATION FOR THE FUND BALANCE BEING WHERE IT IS.
AND, UH, WE GIVE YOU PROPS AS WELL BECAUSE, UH, YOU'VE BEEN, UH, ADVISING US AS COUNCIL MEMBERS TO TRY TO GET THAT FUND BALANCE AS HIGH AS POSSIBLE, UH, TO TRY TO GIVE US A CUSHION TO PLAN FOR OVER THE NEXT COUPLE YEARS ON HOW WE NAVIGATE, UM, OUR FINANCES, ESPECIALLY ONCE THOSE FEDERAL FUNDS, UH, START TO LEAVE THE SYSTEM.
SO WE APPRECIATE YOUR GUIDANCE ON THAT.
UH, FIRST IN THE QUEUE WILL BE COUNCIL MEMBER, UH, DAVE MARTIN, BUT I DO WANT TO ACKNOWLEDGE, UH, COUNCIL MEMBER SALLY ALCO IN ATTENDANCE, AS WELL AS COUNCIL MEMBER AMY PECK AND STAFF FROM, UH, VICE MAYOR PRO TEM CASTEK TATUM'S OFFICE AND STAFF FROM COUNCIL MEMBER GALLEGOS ANDAR JACKSON.
UH, VIRTUALLY WE'LL BE CHAIR DAVE MARTIN.
AND CONTROLLER, THANKS FOR YOUR REPORT.
UH, A LOT OF INFORMATION IN A SHORT PERIOD OF TIME.
I KNOW WE DIDN'T GET THIS UNTIL EIGHT O'CLOCK THIS MORNING, SO I REALLY HADN'T HAD A CHANCE TO DIVE INTO THE DATA, BUT LET ME ASK A COUPLE OF OF QUESTIONS, UM, TO, UH, CHAIR ED POLLARD'S COMMENTS.
THERE WAS THE ATTEMPT TO CAP VALUATIONS IN THE SENATE O OVER THE LAST COUPLE OF WEEKS, AND I DON'T THINK THAT BILL HAS GONE ANYWHERE, SO CORRECT ME IF I'M WRONG.
SO, TAXABLE VALUATIONS OR INCREASE IN 8.5% AND OUR RATE IS AT 0.5336 PROJECTED AS IT WAS IN FY 23, IS THAT CORRECT? YEAH, WE'VE SEEN THAT INCREASE.
AND, AND MAINLY IT'S DUE TO, UM, THE INDEX CALCULATION OF PROP ONE, WE'RE SEEING THE INFLATION HAS BEEN PRETTY ROBUST AS A RESULT.
SO YOU THINK THAT'S GONNA BE LOWERED? WELL, I, I THINK THAT THE CHALLENGE NOW IS WITH SB TWO AND THE ROLLBACK RATE AND SEEING HOW THAT, UH, HAS AN IMPACT, UH, FROM WHAT I'VE BEEN, UH, ADVISED BY LEGAL, YOU KNOW, WE ARE ESSENTIALLY BOUND BY BOTH PROP ONE AND SB TWO, AND, UH, WHICHEVER, UM, IS MORE RESTRICTIVE IS THE NUMBER WE HAVE TO GO TO GO WITH.
SO I JUST, UM, THERE'LL BE A LITTLE BIT MORE, UH, INFORMATION AND TIME NEEDED, I BELIEVE, TO CALCULATE THE SB TWO, UH, RIGHT.
SO JUST, YOU KNOW, WANT TO ADVISE AND CAUTION THIS BODY THAT WE MIGHT HAVE TO REV REVISE THOSE PROPERTY TAX, UH, CAP MAXIMUM ALLOWABLE DOWN FROM THAT, FROM THAT RATE DOWN AGAIN.
SO ONCE AGAIN, TAXABLE VALUATIONS INCREASE IN 8.5% AND THE RATE WILL PROBABLY BE DECREASED.
SO PEOPLE PAY MORE ON THEIR PROPERTY TAX BILL BECAUSE OF THE VALUATION, NOT BECAUSE OF THE TAX RATE THAT WE HAVE IN THE CITY OF HOUSTON.
SO THAT'S JUST AN EDITORIAL COMMENT BY MYSELF.
UH, GENERAL FUND, MAKE SURE I HAVE THIS RIGHT 'CAUSE I WAS JOTTING DOWN NOTES REAL QUICK.
GENERAL FUND EXPENSES INCREASE IN 4.32% IN REVENUE IN INCREASE IN 2.9%, CORRECT? YEAH, THAT'S CORRECT.
AND THAT'S 2.86% OR 2.9%, BUT THAT'S NOT INCLUDING, YOU KNOW, TRANSFER SALE OF ASSETS, UM, BASICALLY ONETIME FINANCING SOURCES.
SO X ONE TIME, WELL, YOU, YOU'RE IN TROUBLE IF YOU START DOING THAT.
SO AS WE BOTH KNOW, AND, AND THANKS FOR YOUR HELP ON THE EP TRUST ACCOUNT, $10 MILLION.
UH, GIVE ME YOUR EDITORIAL COMMENTS ON THAT AS TO WHAT IT DOES IF WE CONTINUE TO GO DOWN THIS PATH, UH, FOR THE REMAINING NUMBER OF YEARS AFTER BOTH YOU AND I, UH, LEAVE IN A COUPLE OF MONTHS.
UH, SO IF WE CAN CONSISTENT WITH THE $10 MILLION GOING TO THE TRUST.
YEAH, SO, UM, YOU KNOW, THE KEY WORD HERE IS SUSTAINABILITY.
AND WE WANNA MAKE SURE THAT EVERY DECISION WE MAKE AND ALL THE DIFFERENT FUNDS AND, YOU KNOW, EXPENDITURES, EVERYTHING IS, UH, SUSTAINABLE.
SO, UH, THE OPEP UH, UNFUNDED LIABILITY, I THINK WAS ESTIMATED TO GROW TO SOMEWHERE AROUND 9 BILLION, UH, PRIOR TO, UM, CHANGES THAT WERE MADE, UH, BY, UH, MAYOR TURNER IN THIS ADMINISTRATION.
UH, AND WITH THOSE CHANGES THAT SLOWED, THAT INCREASE DOWN TO, UH, AROUND THREE AND A HALF BILLION, UM, BUT YOU KNOW, STILL THREE AND A HALF BILLION IN THE FORESEEABLE FUTURE.
UH, POSSIBLY A HIGH AS 4 BILLION DEPENDING ON COSTS, UH, ASSOCIATED WITH HEALTHCARE, UM, PROVIDING HEALTHCARE.
SO WITH OPEG TRUST, ESSENTIALLY YOU SHIFT FROM A PAY AS YOU GO TO A, UM, TRUST FUND, SIMILAR TO WHAT WE HAVE WITH OUR PENSION FUNDS, WHICH ALLOWS US TO, INSTEAD OF PAY AS YOU GO PUT MONEY INTO A FUND, THAT THEN CAN BE INVESTED IN RETURN, A HIGHER RATE OF RETURN BECAUSE IT'S INVESTED IN THE, IN THE MARKET.
OVER TIME, YOU'RE GONNA SEE, UH, HOPEFULLY A SIX TO 7% ANNUALIZED.
AND THAT DOESN'T HAPPEN EVERY, UH, YEAR 'CAUSE IT'S FLUCTUATES UP AND DOWN, BUT WHEN YOU LOOK OVER
[00:35:01]
A 10 YEAR PERIOD, UM, SO IN SHORT, THAT WILL ESSENTIALLY ALLOW US TO BRING THAT OPE UNFUNDED LIABILITY PROBABLY DOWN CLOSER TO A BILLION DOLLARS, WHICH, UH, THEN IN MY ESTIMATION, PUTS IT IN STRIKING DISTANCE THAT YOU CAN, UH, HOPEFULLY GET THAT, UH, TO ZERO.IT'S VERY SIMILAR, WHAT WE DID WITH THE PENSION UNFUNDED LIABILITY, IT WAS 8.2 BILLION.
WE IMPLEMENTED THE REFORMS, UH, TWO YEARS AGO.
WE GOT IT DOWN TO 1.49 BILLION.
I THINK BECAUSE OF, YOU KNOW, MARKET VOLATILITY AND DOWNTURN IN THE MARKET LAST YEAR.
UM, YOU KNOW, IT'S AROUND 2.2 BILLION.
BUT AGAIN, WE HAVE A FIGHTING CHANCE NOW WITH A CLOSED LOOP, 30 YEAR AMORTIZATION AND SOME OF THE OTHER REFORMS THAT WE PUT IN PLACE WITH THE PENSIONS TO ACTUALLY HAVE A, A FUNDED PENSION IN, IN 30 YEARS.
AND I THINK, UH, KUDOS TO THE ADMINISTRATION ON, UH, MAKING, UH, THE INVESTMENT IN THE OPEP TRUST, UH, TO GO AHEAD AND MOVE THAT FORWARD, BECAUSE I THINK YOU'LL HAVE THE SAME RESULT.
YOU'LL LOOK BACK IN THE NEXT 20 OR 30 YEARS AND YOU'LL SAY, MY GOODNESS, WHAT THEY DID ACTUALLY SAVED US FROM, UM, YOU KNOW, A PRETTY BAD FINANCIAL SITUATION.
I'M NOT SURE IF THERE'S ANYBODY ELSE IN QUEUE, UH, PUT ME BACK IN QUEUE.
COUNCIL MEMBER ALCO, THANK YOU CHAIR AND THANK YOU CONTROLLER FOR THE PRESENTATION.
AND, AND YES, TO YOUR POINT, UM, COUNCIL MEMBER POLLARD, THERE, THERE WAS A HOUSE BILL TWO THAT PASSED, LIKE PRETTY SUBSTANTIALLY IN THE HOUSE, LIKE 1 39 TO FIVE.
I'M LOOKING WHAT WOULD LIMIT THE CAP TO 5%.
UM, BUT IT'S NOT, IT'S THE WHAT, FROM WHAT I'M READING, IT'S NOT GETTING ANYWHERE IN THE SENATE SO THAT NO, THAT'S WHAT'S HAPPENING ON THAT DEAL.
UM, THAT WOULD SIGNIFICANTLY IMPACT US.
I MEAN, I LIKE, I, LIKE YOU SAID, IT WOULDN'T MAYBE CONTROLLER BE DOLLAR FOR DOLLAR BECAUSE OF THE REV CAP, BUT THAT WOULD HAVE AN, ALTHOUGH I'D LIKE IT AT MY OWN HOUSE, I, I THINK IT WOULD IMPACT US.
UM, ON, UM, ON THE OTHER MATTER, AT THE STATE CONTROLLER, THE, THE SUPREME COURT, PROP ONE, PROP TWO, BILL WHITE, YOU KNOW, REFERENDUM, UM, CAN YOU OPINE A LITTLE BIT ON HOW THAT MIGHT AFFECT PROPERTY TAX? UM, THAT WAS SURPRISING TO ME BECAUSE SO MUCH TIME HAS ELAPSED SINCE, UH, THIS WAS, I THINK FIRST INTRODUCED INTO THE COURTS, BUT, UH, ESSENTIALLY THEY WERE COMPETING REVENUE CAP PROPOSITIONS ONE AND TWO, UH, BACK IN, UH, 2005.
UH, PROP ONE ENDED UP THE ONE THAT, UH, MAYOR BILL WHITE SUPPORTED THAT LIMITS ONLY THE GENERAL FUND REVENUE, UH, PROP, UH, TWO LIMITS THE GENERAL FUND AND ENTERPRISE REVENUE.
SO, UM, BECAUSE PROP ONE RECEIVED A MAJORITY OF THE VOTES, UH, IT WAS DEEMED AT THE TIME THAT PROP ONE WAS THE ONE THAT WOULD BE USED GOING FORWARD.
NOW, THERE IS A DISCUSSION, UH, LEGALLY ABOUT POTENTIALLY REVIVING THE LAWSUIT AND LOOKING AT, UH, WHETHER OR NOT IT SHOULD HAVE BEEN PROP TWO ACTUALLY THAT WAS IMPLEMENTED.
AND I'M NOT SPEAKING TO ANY SURE, UH, LEGAL, UM, IMPLICATIONS OF THAT OR, OR I'M JUST MERELY REFERENCING IT.
BUT, UM, YOU KNOW, THE CHALLENGE IS THAT, YOU KNOW, WE'RE SEEING, UH, IN AIRPORT AND CONVENTION ENTERTAINMENT AND COS, YOU KNOW, PRETTY INCREASED, UH, REVENUES YEAR OVER YEAR.
WE NEED THAT MONEY TO RUN THESE, AND THESE ARE BUSINESS TYPE, UH, ACTIVITIES, SO THEY SUSTAIN THEMSELVES WITH THE REVENUE THEY GENERATE.
SO MY, UM, YOU KNOW, MY OPINION, UH, THAT, YOU KNOW, IF THERE WERE A PROPOSITION TWO THAT WERE IMPLEMENTED THAT WOULD THEN CAP THOSE ENTERPRISE FUNDS REVENUE SIMILAR TO WHAT WE DO IN THE GENERAL FUND, RIGHT? IT'S ONLY GOING TO LIMIT THE AMOUNT OF, UM, YOU KNOW, SERVICE AND ACTIVITIES THAT THESE ENTITIES.
AND, AND SINCE WE, WELL, SORRY, I'LL PUT YOU BACK IN THE QUEUE.
COUNCIL MEMBER AMY PECK, THANK YOU.
AND THANK YOU CONTROLLER FOR THE PRESENTATION.
UM, SO FOR FY 23, UM, THE EXPECTED FUND BALANCE WAS $311 MILLION, AND IT LOOKS LIKE THE ACTUAL IS 358 MILLION, WHICH OBVIOUSLY THAT'S A BETTER POSITION TO BE IN THAN IT WAS, YOU KNOW, WE WERE LOSING MONEY THERE.
BUT WHEN YOU'RE LOOKING AT THAT 2.6% FOR A STRUCTURALLY BALANCED BUDGET, HOW IS THAT ADDITIONAL MONEY THAT'S COMING IN THAT WE WEREN'T EXPECTING FACTORED INTO WHETHER OR NOT WE'RE STRUCTURALLY BALANCED OR NOT? WELL, I THINK, YOU KNOW, UH, WE USED $160 MILLION, UH, OF FEDERAL FUNDING, UH, FOR REVENUE REPLACEMENT IN THIS BUDGET.
UH, THAT'S PROPOSED FOR FY 24.
UM, SO I THINK REALLY WHAT YOU WOULD, UH, TO SEE THE TRUE STRUCTURAL NATURE OF THE, THE BUDGET IS TAKE ALL THOSE ONE-TIME FINANCING SOURCES OUT AND JUST MATCH, UH, RECURRING, UH, REVENUES WITH RECURRING EXPENDITURES.
AND IF WE DID TAKE OUT THAT 160 MILLION, WE'D ESSENTIALLY HAVE TO DRAW IT DOWN FROM FUND BALANCE, WHICH WE DO HAVE, BUT WE'VE ACTUALLY BUILT THAT FUND BALANCE UP OVER THE LAST COUPLE OF YEARS.
SO IT'S NOT LIKE WE ADDED, UH, ALL OF THAT, UH, JUST, UH, IN THIS YEAR.
UM, SO, UH, I, I GUESS TO ANSWER YOUR QUESTION,
[00:40:01]
AGAIN, GOING BACK TO THE SIMPLE EXAMPLE IS IF YOU LOOK AT THE GROWTH IN REVENUE, UH, EXCLUDING ONE-TIME FINANCING SOURCES THAT SHOULD ALWAYS BE, UH, HIGHER THAN YOUR, YOUR GROWTH IN EXPENDITURES.AND, AND I THINK THAT'S A PRETTY, AND WE, UNFORTUNATELY, I DON'T THINK WE LOOK AT THOSE NUMBERS AS MUCH.
WE TEND TO FOCUS ON FUND BALANCE.
UM, AGAIN, THE FUND BALANCE PERCENTAGES IS HIGH, UH, NOW, WHICH IS GOOD, BUT I WOULD ARGUE, UM, WITH SUCH AN INCREASE IN, UH, PROPERTY AND SALES TAX REVENUE OVER THE LAST EIGHT YEARS, YOU KNOW, WE'RE STILL HAVE A PRETTY LARGE, UH, STRUCTURAL, UH, IMBALANCE.
SO IF YOU WERE TO NORMALIZE THOSE REVENUES, UH, WITH THE EXPENDITURES MAINTAINING THE SAME LEVEL, YOU'RE GONNA SEE EVEN LARGER, UM, YOU KNOW, STRUCTURAL IMBALANCE.
AND EVEN THAT WE HAVE A HIGH FUND BALANCE, THE HIGHER THAT STRUCTURAL IMBALANCE IS, THE QUICKER IT EATS AWAY AT FUND BALANCE.
UM, SO IT IS GREAT THAT THE NUMBER IS HIGH.
IT'S JUST, YOU KNOW, GONNA BE A QUESTION TO SEE HOW LONG THE SALES TAX REVENUE CONTINUES.
AND WE KNOW THAT THE FEDERAL MONEY IS, UH, BASICALLY EVENTUALLY BURNING OFF.
SO, UM, YOU KNOW, WE'RE JUST GONNA HAVE TO, THESE THINGS ARE VERY HARD TO PREDICT, BUT AGAIN, WHEN YOU SPEND MORE MONEY THAN YOU TAKE IT IN REVENUE, I, I CAN TELL YOU WITH ABSOLUTE CERTAINTY, UH, MY DAUGHTER LIKES TO TAKE HER ALLOWANCE AND GO TO MARBLE SLAB AND SHE GETS $5 FOR ALLOWANCE, BUT SLAB IS SEVEN.
SHE'S NOW FIGURING OUT SHE CAN'T DO THAT ANYMORE 'CAUSE SHE DOESN'T HAVE ENOUGH MONEY.
YEAH, SHE'S, SHE'S LEARNING A QUICK LESSON THERE.
UM, WHAT WE'VE BEEN JOINED BY COUNCIL MEMBER KOSH VIRTUALLY.
SO, HEY, COUNCIL MEMBER KOSH, UM, REALLY QUICKLY, CAN YOU ELABORATE A LITTLE MORE ON WHAT YOU'VE BEEN HEARING REGARDING THAT LAWSUIT AND THE RATIONALE BEHIND EVEN BRINGING IT BACK OR THE, THE THOUGHT PROCESS THAT WE MAY HAVE BEEN UNDER THE WRONG PROPOSITION? YEAH, I, I THINK I PRO PROVIDED SOME CONTEXTUAL, UH, INFORMATION, BUT I, I WANNA BE CAREFUL BECAUSE I'M NOT AN ATTORNEY AND I KNOW, UH, I'VE BEEN ADVISED IN THE PAST WHEN WE'RE ENTERING INTO ANY KINDA LEGAL ACTION, UH, COMMENTS THAT WE MAKE IN A PUBLIC FORUM, COULD, YOU KNOW, HAVE SOME KIND OF IMPACT.
BUT I, I, I WILL JUST SAY THAT, UH, SHOULD THAT, YOU KNOW, RESURFACE AND, UH, YOU KNOW, THE RULING TO GO IN AN OPPOSITE, YOU KNOW, A DIFFERENT DIRECTION THAN IT DID IN THE PAST, AND PROP TWO ACTUALLY TO GET IMPLEMENTED, I THINK IT WOULD, UH, BE, UH, QUITE RESTRICTIVE ON, UH, THE ENTERPRISE FUNDS.
UH, AGAIN, THE QUESTION IS, SO WHEN DOES IT START? DO YOU ACTUALLY GO BACK FROM THE POINT OF WHEN THE ELECTION OR THE REFERENDUM WAS, UH, IF YOU LOOK AT, YOU KNOW, TO COUNCIL MEMBER, UH, MARTIN'S, UH, COMMENTS EARLIER, PRE REV CAP, OUR, UM, TAX RATE WAS, UH, 63.88 CENTS.
UM, FOR FY 24, IT'S PROPOSED AT 53.36 CENTS.
SO IF WE HAD A SIMILAR IMPACT IN OUR ENTERPRISE FUNDS, IT WOULD, YOU KNOW, ESPECIALLY IF WE HAD TO GO BACK HISTORICALLY, AGAIN, I DON'T KNOW, I, I THINK I WOULD REFER THAT TO LEGAL CHAIR.
CONTROLLER, I'M GONNA TAKE YOU DOWN A LITTLE BIT OF A FOR FORWARD LOOKING PATH.
AND, UH, I KNOW THAT'S, THAT'S TOUGH TO DO.
I, I LOOK AT TRENDS REPORT, I LOOK AT THE TRENDS FROM THE PAST, BUT I ALSO LOOK AT WHAT I THINK THE TRENDS FOR THE FUTURE ARE GONNA BE.
SO I'M GONNA ASK YOU SOME INFORMATION RELATED TO, UH, THE PAST SIX YEARS, WE'VE DONE AN OUTSTANDING JOB, UH, ON PENSION DEBT AND OPE DEBT.
AND I MADE A COMMENT AT THE PRESS CONFERENCE.
I THOUGHT IT WAS A TEXTBOOK BUSINESS CASE STUDY FOR SOMEONE TO LOOK AT, SO HOW YOU TAKE DOWN PENSION DEBT AND OPE DEBT IN CITIES IN A SIX YEAR PERIOD OF TIME.
BUT YOU MENTIONED THE CHALLENGES ON THE GENERAL FUND OF, WE HAVE $137 MILLION.
I THINK THIS WAS YOUR NUMBER ABOVE 7.5 FOR FISCAL YEAR 24.
THAT LEAVES US WITH A HUNDRED MILLION LEFTOVER FOR FISCAL YEAR 25.
SO I THINK OUR CHALLENGES ARE GONNA BE FISCAL YEAR 26 WHERE WE DEPLETE THE 1 37 AND THEN THE A HUNDRED, AND THEN WE HAVE SOME SIGNIFICANT CHALLENGES IF THE GENERAL FUND EXPENDITURES STILL MAINTAIN THAT 4.3% AND THE REVENUE'S ONLY AT 3%.
SO SOME COMMENTS ON THOSE SORT OF FORWARD LOOKING STATEMENTS IN YOUR OPINION, BECAUSE A LOT OF THE PUNDITS ARE LOOKING AT US IN THE GENERAL FUND, AND I WOULD SAY EVERY STATE, EVERY COUNTY, EVERY CITY IN THE UNITED STATES RECEIVED FEDERAL FUNDS.
EVERYONE DID WHAT YOU DID WITH THE FEDERAL FUNDS, UH, WAS PREDICATED UPON YOUR NEEDS.
I THINK WE'VE DONE A PRETTY GOOD JOB IN FEDERAL FUNDS, WHICH IS WHY WE'RE LOOKING AT THAT PRETTY GOOD FUND BALANCE.
BUT IN FISCAL YEAR 26, THEN WE HAVE SOME
[00:45:01]
SIGNIFICANT CHALLENGES.SO YOUR COMMENT, WELL, I, UH, COUNCIL MEMBER, I THINK THAT'S EXACTLY RIGHT, AND THIS IS THE CHALLENGE IS THAT, UH, YOU KNOW, WE HAVE TWO THINGS ESSENTIALLY PROPPING UP THIS BUDGET ARE, UM, ROBUST SALES TAX AND PROPERTY TAX.
UM, BUT, BUT MORE SO THE FEDERAL FUNDING AND, UM, POTENTIAL USE OF FUND BALANCE GOING FORWARD.
SO AS YOU LOOK INTO THE FUTURE AND, AND, YOU KNOW, LOOK AT THIS BUDGET, WE USED $160 MILLION OF, UH, REVENUE REPLACEMENT FEDERAL FUNDING.
UM, YOU KNOW, ONCE THAT, UH, EXPIRES NORMALLY WITH THESE TYPE OF ONE-TIME FINANCING SOURCES, YOU HAVE TO USE THEM EVERY YEAR.
AND THE CHALLENGES CONTINUING TO FIND, YOU KNOW, $160 MILLION EVERY YEAR.
UM, SO ONCE THAT FEDERAL FUND, UH, FUNDING BURNS OFF, WHICH, YOU KNOW, WE ANTICIPATE, UH, THE, YOU KNOW, ULTIMATE, UH, EXPENDITURES OF THAT, UH, IN, AT THE END OF, UH, CALENDAR YEAR 26, UH, AND ALSO BURNING THROUGH, UH, FOR PROBABLY THE NEXT COUPLE OF YEARS AS SALES TAX AND PROPERTY TAX MODERATES, UM, THE, UM, YOU KNOW, FUND BALANCE.
UH, YEAH, WE SEE A PRETTY, UH, POTENTIALLY I THINK THE ADMINISTRATION ESTIMATED WHAT THAT COULD BE, UH, IN A, YOU KNOW, WORST CASE SCENARIO, 244 MILLION, UM, POTENTIAL, UH, BUDGET, UH, DEFICIT IN, IN THE FUTURE.
AND I THINK THAT'S REALLY THE CHALLENGE.
AND, AND THE YEAR IS, I BELIEVE, UH, 26, UM, IT COULD, YOU KNOW, BECAUSE OF, YOU KNOW, NOT HITTING A RECESSION, AND IF SOMEHOW SALES TAX CONTINUES TO CLIMB, MAYBE IT'S 27, BUT IT'S DEFINITELY COMING.
AND THE CHALLENGES, I THINK, UH, IF WE SIT AND PUT THESE HATS ON, UH, COUNCIL MEMBER MARTIN, AS YOU'RE DISCUSSING, UH, LOOKING INTO THE FUTURE, UH, WE KNOW IT'S COMING.
SO 244 MILLION, UH, UNDER THE CURRENT, UH, GENERAL FUND, LET'S SAY THAT'S 9%.
UH, THIS IS REALLY THE CHALLENGE TO THIS BODY IS DO YOU WANT TO TRY AND CUT THE BUDGET 9% IN 26, OR DO YOU WANT TO TRY AND START AGAIN SLOWING THE RATE OF GROWTH OF YOUR EXPENDITURES TO GET THEM IN LINE WITH, UH, REVENUES SO THAT MAYBE YOU CAN REDUCE THAT, UM, THAT NUMBER IN THE FUTURE SO YOU'RE NOT HAVING TO DIGEST THE 9% CUT IN IN THE FUTURE.
AND THE CHALLENGE BECOMES EVEN MORE COMPLICATED BECAUSE OF, YOU'VE SEEN THE PRESENTATION BEFORE, YOU KNOW, 60% OF OUR BUDGET IS, UH, PUBLIC SAFETY, AND HISTORICALLY WE HAVEN'T BEEN, UH, WILLING TO CUT PUBLIC SAFETY.
SO, UM, YOU KNOW, THAT'S A, A LARGE PORTION, UM, YOU KNOW, MORE THAN HALF OF OUR, OUR GENERAL FUND EXPENDITURES.
SO IF YOU'VE GOTTA CUT 9% OUTTA THE OTHER HALF, YOU KNOW, THEN YOU'RE, YOU'RE NOT TALKING ABOUT 9%, YOU'RE TALKING ABOUT 18%.
SO, AND, AND AGAIN, THIS I THINK ULTIMATELY WILL LEAD TO A REDUCTION OF HEAD COUNT, BECAUSE I THINK THAT'S THE ONLY PLACE THAT WE HAVE THE ABILITY TO CUT ABSENT OF GENERATING SOME NEW SOURCE OF REVENUE.
SO, UM, I, I THINK THE NUMBER IN 26 IS, YOU KNOW, 250 TO 300 MILLION, AND WE SHOULD BE PLANNING NOW TO FIGURE OUT HOW WE LESSEN THAT BLOW.
I AGREE WITH YOU THAT, UM, WE ALL HAVE TO LOOK AT FINDING WAYS TO SLOW EXPENDITURES WHERE WE CAN JUST LIKE WE WOULD DO IN OUR OWN, UH, HOUSEHOLD BUDGET, BUT I THINK WE ALSO HAVE TO BE VERY CREATIVE AND FINDING NEW REVENUE STREAMS. I THINK THE CITY HAS TO BE RUN LIKE A BUSINESS.
UH, WE'RE, WE'RE BASICALLY A LOGISTICAL SERVICES BUSINESS.
AND WE HAVE TO FIND WAYS TO, UH, FIND REVENUE SOURCES THAT DON'T HURT THE PUBLIC, BUT ARE JUST SENSIBLE AND RATIONAL, AND ALSO LOOK AT THE FACT THAT, UH, WE HAVE TO MAKE OUR CITY AS ATTRACTIVE AS POSSIBLE.
YOU TALKED ABOUT THE, UM, WITH THE WORLD CUP COMING IN, WHAT, 2026, I MEAN, YESTERDAY WE HAD, UH, A PRESENTATION THAT SAYS THAT MAY BE EQUIVALENT TO EIGHT SUPER BOWLS, RIGHT? WHAT WILL THAT DO FOR OUR ECONOMY AROUND THE TIME OF 26, 27, RIGHT? AND WHAT, WHAT ARE WE DOING IN THE INTERIM TO FIND WAYS TO ATTRACT AS MANY PEOPLE FOR AS MANY ATTRACTIONS, UH, THAT WE CAN CONTINUE TO BUILD ON THE SALES TAXES AND CONTINUE TO BUILD ON, UH, STRENGTHENING THE ECONOMY? SO ALTHOUGH I, I SEE, UM, FROM A CONSERVATIVE PERSPECTIVE THAT AFTER THESE COVID DOLLARS BURN OUT AND SALES TAXES START TO NORMALIZE, UH, IT SEEMS LIKE THE CITY OF HOUSTON ALWAYS HAS SOMETHING ON THE HORIZON THAT BOOSTS US BACK INTO A PLACE WHERE WE'RE SUSTAINABLE AND WE CAN FIND A WAY TO MOVE ON TO THE NEXT YEAR.
AND I THINK RIGHT WHEN THESE FEDERAL DOLLARS ARE STARTING TO BURN, BOOM, WE GET EIGHT SUPER BOWLS, AND THEN WHEN THAT STARTS TO MAYBE BURN OUT, BOOM, SOMETHING ELSE POPS.
NOW THAT'S NOT MAYBE THE BEST WAY TO, UH, LOOK AT YOUR, YOUR FUTURE FINANCIAL, UM,
[00:50:01]
SUSTAINABILITY, BUT, UM, I THINK THERE IS SOME OPTIMISM OUT THERE THAT WE DO HAVE SOME THINGS THAT WILL CONTINUE TO PUT US ON THE RIGHT PATH.AND AS LONG AS WE'RE, UH, DILIGENT WITH OUR EXPENDITURES, UH, HOPEFULLY, UM, OUR FINANCIAL FUTURE WILL BE IN GOOD SHAPE.
BUT, UH, I SEE THAT WE HAVE DAY CHAIR MARTIN IN, AGAIN, YOU GOTTA BE IN THE CHAMBERS THAT THEY'RE GONNA ASK ALL THESE QUESTIONS.
AND, UH, GUESS WE HAD IN 26TH, POLLARD, WE HAVE THE WORLD CUP, SO MAYBE THAT'LL BE A BIG HELP.
AND THAT'S NOT A DAILY, THAT'S A NUMBER OF WEEK.
UH, CHRIS, JUST YOUR VIEW ON PENSION DEBT, OPE DEBT OVER THE LAST SIX YEARS, HOW WE'VE DONE, AND MORE IMPORTANTLY, DO YOU THINK WE'LL GET A CREDIT LIFT FROM, UH, OUR AGENCIES? WELL, SO I THINK, YOU KNOW, UM, FROM THE PENSION REFORM, YOU KNOW, THE, THE WORD THAT COMES TO MIND IS TRANSFORMATIVE.
I MEAN, WE WERE, AGAIN, LOOKING AT AN $8.2 BILLION UNDER UNFUNDED LIABILITY WHEN YOU USE THE 7% DISCOUNT RATE.
UM, SHORTLY AFTER THE MAYOR AND I TOOK OFFICE, AND NOW, UM, YOU KNOW, THAT NUMBER IS SOMEWHERE JUST ABOVE 2 BILLION.
SO WE'VE MADE SOME, SOME GREAT PROGRESS THERE.
UM, I KNOW WITH SOME OF THE REFORMS THAT HAVE BEEN DONE ON OPEP, UM, THERE HAVE BEEN, UH, PRETTY, UM, MEANINGFUL REDUCTIONS, AND I THINK THE OPEP TRUST, YOU KNOW, WILL LEAVE THAT TO THE ACTUARIES ONCE THAT GETS FULLY IMPLEMENTED.
BUT I THINK THE PROJECTIONS, YOU KNOW, TAKE IT POTENTIALLY DOWN TO, YOU KNOW, IN THE BILLION DOLLAR, UH, RANGE.
SO AGAIN, UH, BOTH OF THOSE MAKES IT POSSIBLE THAT YOU CAN, YOU KNOW, OVER A PERIOD OF TIME FULLY FUNDING THEM, UH, GET TO, YOU KNOW, A FULLY FUNDED PENSION AND OPEP.
UM, YOU KNOW, THE CHALLENGE IS, I SEE IT WHEN I CAME IN, IT WAS PENSION, OPEP, AND STRUCTURALLY BALANCED BUDGET.
YOU KNOW, THE THING THAT WE HAVEN'T TALKED ABOUT, UH, DURING THIS SESSION IS, UH, DEFERRED MAINTENANCE.
AND, YOU KNOW, I BELIEVE WE HAVE, WE'VE HEARD THIS FROM, UH, GENERAL SERVICES, UM, PRESENTATION, YOU KNOW, $600 MILLION ROUGHLY IN DEFERRED MAINTENANCE.
BUT, YOU KNOW, IF YOU TALK WITH, UH, PUBLIC WORKS, UH, LOOKING AT THE EAST WATER, UH, PURIFICATION PLANT ALONE, UM, YOU KNOW, THERE'S A BILLION DOLLARS PLUS IN DEFERRED MAINTENANCE IN THAT ONE PLANT ALONE.
SO GOING BACK TO THIS THIRD TENANT OF, UH, YOU KNOW, THE STRUCTURALLY BALANCED BUDGET, YOU'VE GOTTA START GETTING YOUR, YOU KNOW, HOPEFULLY YOUR REVENUES TO EXCEED YOUR, UH, EXPENDITURES, BECAUSE I THINK THAT THERE'S, YOU KNOW, BILLIONS OF DOLLARS IN DEFERRED MAINTENANCE, SOME OF THAT YOU MIGHT BE ABLE TO, TO BOND OUT, BUT EVEN IF YOU BONDED OUT, YOU'RE GONNA NEED, UH, ADDITIONAL REVENUES TO BE ABLE TO, YOU KNOW, MANAGE THE DEBT SERVICE.
SO I THINK WE'VE MADE GREAT FRONTS ON THE TWO OPE AND PENSIONS.
UM, YOU KNOW, THE, THE NEXT REAL CHALLENGE, UH, IS THE STRUCTURALLY BALANCING THE BUDGET, RIGHT? WELL, CREDIT RATINGS, SAY IT AGAIN, CHAIR.
YEAH, I WAS ASKING ABOUT CREDIT RATING LIFT.
UH, YEAH, I, I BELIEVE AT SOME POINT WE COULD SEE, YOU KNOW, AND THAT'S THE THING BEING IN, IN AND AROUND, UH, INVESTMENTS FOR NOW, UH, I MUST BE GETTING OLD, ALMOST THREE DECADES.
UM, IT'S, IT'S REALLY TOUGH TO GET INCREASES.
UH, YOU KNOW, YOU CAN GET DOWNGRADES, UH, OR WATCHES PRETTY EASILY, BUT, UH, IT'S TOUGH TO GET INCREASES.
SO I WOULD SAY, YOU KNOW, HOPEFULLY, UM, YOU KNOW, THERE'S A POTENTIAL FOR THAT, BUT I, I CAN'T SPECULATE AS TO WHETHER OR NOT THAT WILL IN FACT HAPPEN.
CONTROLLER, AGAIN, THANK YOU TO YOU AND YOUR ENTIRE TEAM FOR THE PRESENTATION.
UH, THIS WAS REALLY GOOD INSIGHT AND GOOD DISCUSSION, AND, UH, WE APPRECIATE IT ALL.
AT THIS TIME, WE'LL MOVE INTO OUR PUBLIC COMMENT PERIOD.
WHEN YOU HEAR YOUR NAME, PLEASE COME TO THE PODIUM.
FIRST PUBLIC SPEAKER IS MR. DOUG SMITH.
CHRIS, HOW ARE YOU? GOOD, HOW ARE YOU? GOOD MORNING.
UM, I HOPE THAT THERE'LL BE A REALLY DETAILED EXPLANATION OF THE PROPERTY TAX INCREASE, BECAUSE CHRIS TALKED ABOUT PROPERTY TAXES INCREASING 8%, AND I WOULD LIKE A REALLY DETAILED ANALYSIS OF HOW THAT RELATES TO THE, SOMETHING THAT'S UNDERSTANDABLE TO CITIZENS, HOW THAT RELATES TO THE 4.5% MAX WITH PROP
[00:55:01]
ONE.AND I THINK WHAT IS A 3.5% MAX IN SB TWO, AND THAT'S SOMETHING THAT CAN HAPPEN LATER, BUT I REALLY HAVE TROUBLE UNDERSTANDING HOW THEY CAN, UH, CONSIDER AN 8% PROPERTY TAX INCREASE GIVEN THOSE TWO OTHER LIMITS.
SO THAT'S ONE THING I WANT TO TALK ABOUT.
AND YOU HAVE IN FRONT OF YOU, UH, AN ANALYSIS THAT I DID OF GENERAL FUND REVENUE, AND THIS RELATES TO THE FACT I KEPT HEARING ALL THE TIME ABOUT HOW WE NEEDED THE COVID MONEY BECAUSE OF REVENUE REPLACEMENT.
AND IF YOU LOOK AT THIS ANALYSIS, WE DID NOT LOSE ANY GENERAL FUND REVENUE EXCEPT FOR $20 MILLION BETWEEN 2019 AND 2020.
AND THE ONLY REASON WE CAN CLAIM THE REVENUE LOSS IS BECAUSE OF AN ABSOLUTELY LIBERAL ANALYSIS.
IF YOU LOOK AT THE TREASURY DEPARTMENT, UH, WAYS TO CALCULATE THIS, THEY SAID THAT YOU CAN ASSUME A 5.2% INCREASE, EVEN IF YOU DIDN'T HAVE IT, AND THAT WOULD BE $125 MILLION, UH, EVERY YEAR.
AND SO WE HAVE NOT LOST REVENUE, AND I THINK IT'S IMPORTANT FOR CITIZENS TO UNDERSTAND THAT WE JUST HAD A GIFT FROM THE FEDERAL GOVERNMENT, AND IT'S REALLY NO WONDER WHY WE HAVE A $32 TRILLION, UH, DEFICIT OF THE FEDERAL GOVERNMENT GIVEN GIFTS LIKE THIS.
SO I JUST WANTED TO MAKE THAT CLEAR IN DEFENSE OF FULL, FULL EXPOSURE, EXCUSE ME, FULL EXPOSURE, UH, RELATIVE TO THE, UH, THERE IS NO REVENUE LOSS TO THE CITY, SO, WELL, I'LL LET, I'LL LET THE CONTROLLER MAYBE ANSWER THAT FIRST QUESTION.
UH, WE, I WOULD PROBABLY AGREE TO DISAGREE WITH YOU ON THE SECOND ONE.
UM, I DO THINK WE HAD, UM, MAJOR REVENUE LOSS BASED ON COVID.
UM, IT'S A MATTER OF INTERPRETATION, HOW YOU WANNA LOOK AT THINGS, BUT FROM OUR PERSPECTIVE, OR FROM OUR PERSPECTIVE, I THINK THERE WERE, THERE WERE SOME MAJOR GAPS THAT WE HAD TO FILL CONTROLLER.
SO, UH, ON YOUR FIRST QUESTION, UH, MR. SMITH ON THE, UM, REVENUE, UH, PROPERTY TAX CALCULATION, UM, I, I HAD SIMILAR, UM, QUESTIONS WHEN I SAW THE PROPOSAL FROM THE ADMINISTRATION.
WE'VE, UH, CHECKED THE PROP ONE, UH, CALCULATION, AND ESSENTIALLY BECAUSE OF THE INDEX CALCULATION AND THE HIGHER RATE OF INFLATION, UM, WE'VE ABLE, AND, AND BECAUSE THEY'RE ESSENTIALLY A FOUR AND A HALF OR AN INDEX, IT'S QUITE COMPLICATED.
I'M HAPPY TO WALK, UH, THROUGH THAT WITH YOU, UH, OFFLINE.
UM, BUT BASICALLY BECAUSE OF THE INCREASE OF, UH, INFLATION AND THE INDEX CALCULATION, WE'RE ABLE TO SEE SUCH AN INCREASE IN, UH, PROPERTY TAX, UM, REVENUE.
WHAT ABOUT SB TWO? WELL, SB TWO IS, UH, WE'RE GONNA HAVE TO CONTINUE TO, UH, WORK THROUGH THAT EQUATION.
AND I DO BELIEVE, UH, FOR THE FIRST TIME, UH, WE'RE GONNA SEE, UM, YOU KNOW, BECAUSE OF THE ROLLBACK RATE, WE, WE WILL HAVE TO SEE, UH, THEY LOWERED IT FROM 8% DOWN TO, UM, THREE POINT A HALF.
SO, UM, YOU KNOW, THAT'S ONE OF THE COMMENTS I MADE TODAY THAT, UM, BECAUSE OF THE TIMING AND INFORMATION, WE'LL, WE'LL PROBABLY DO THAT CALCULATION AFTER, BUT WE WOULD SEE POTENTIALLY A, A, A SLIGHT DECREASE IN THE AMOUNT OF PROPERTY TAX REVENUE.
SO JUST, YOU KNOW, UM, PUTTING THIS BODY ON NOTICE AGAIN, MAKES ME LESS CONCERNED BECAUSE WE HAVE SO MUCH FUN BALANCE, WE HAVE PLENTY OF MONEY TO COVER IT.
BUT AGAIN, BACK TO THAT STRUCTURALLY BALANCED BUDGET, WE NEED TO MAKE SURE THAT WE'RE, YOU KNOW, COGNIZANT OF HOW MUCH REVENUE WE'RE TAKING IN RELATIVE TO EXPENDITURES.
WELL, I HOPE WE HAVE AN EASILY UNDERSTANDABLE ANALYSIS OF THOSE TWO THINGS.
AND VICE CHAIR, IN ANSWER TO YOUR QUESTION, YOU HAVE THE SHEET IN FRONT OF YOU, DON'T YOU? I DO.
I DON'T KNOW HOW YOU CAN SAY THERE WERE BIG REVENUE LOSSES WHEN YOU LOOK AT THIS.
BLANDING DON'T SEE SABA DEBT COMPLETES OUR, UH, PRESENTATION, UH, FOR THIS BUDGET WORKSHOP.
WE WILL NOW TAKE A FIVE MINUTE BREAK AS WE TRANSITION TO THE CONTROLLER'S OFFICE BUDGET PRESENTATION.