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TODAY OF BUDGET[Budget and Fiscal Affairs on May 30, 2024.]
WORKSHOPS FOR THE FY 2025 PROPOSED BUDGET.AND I AM VERY THRILLED TO HAVE OUR CITY CONTROLLER HERE WHO IS GONNA GIVE THE TRENDS REPORT FOR FY 2025.
I WANNA THANK, UM, COUNCIL MEMBERS AND PRESENT, UH, THAT ARE PRESENT IN THE CHAMBER.
THERE IS MY VICE CHAIR COUNCIL MEMBER MARIO CASTILLO, VICE MAYOR PRO TEM AMY PECK, DEEDEE WITH MAYOR PRO TEM MARTHA CASTEX TATUM'S OFFICE.
WE HAVE COUNCIL MEMBER JULIAN RAMIREZ HERE, AND ANNA WITH COUNCIL MEMBER ABBY CAYMAN'S OFFICE.
VERONICA'S ONLINE, AND VERONICA WITH COUNCIL MEMBER PLUMMER'S OFFICE IS ONLINE, AND I'M SURE OTHERS WILL BE JOINING AS WE GET STARTED.
SO, UM, CONTROLLER WITH THAT, THE FLOOR IS YOURS.
UH, MEMBERS OF COUNCIL AND AND STAFF.
I'M PLEASED TO PRESENT THE TRENDS REPORT FOR FISCAL YEAR 2025.
AS THE CHIEF FINANCIAL OFFICER FOR THE CITY OF HOUSTON, I HAVE A RESPONSIBILITY TO PROVIDE THE MEMBERS OF CITY COUNCIL AND THE PUBLIC WITH AN OBJECTIVE MEASURE OF THE CITY'S FINANCIAL HEALTH.
THE CITY OF HOUSTON CURRENTLY FACES SERIOUS FINANCIAL CHALLENGES, NAMELY AN ANNUAL BUDGET SHORTFALL APPROACHING A QUARTER BILLION DOLLARS.
MANY OF THESE CHALLENGES HAVE BEEN BREWING FOR SOME TIME, AND IF LEFT UNADDRESSED, OUR BUDGET SHORTFALL WILL BECOME MORE CRITICAL IN THE YEARS AHEAD AND THREATEN CITY SERVICE DELIVERY AS WELL AS HOUSTONIAN QUALITY OF LIFE.
THE CITY'S PRACTICE OF SELLING ASSETS TO PLUG OUR BUDGET HOLES SIMPLY WILL NOT LAST.
AND THEIR FEDERAL FUNDING THAT WAS PROVIDED THROUGH PRESIDENT BIDEN'S AMERICAN RESCUE PLAN IS GOING TO RUN DRY SOON WITH THE PASSAGE OF THIS BUDGET.
AS THESE FINITE RESOURCES BECOME OBSOLETE, THE NEEDS ASSOCIATED WITH OUR GROWING CITY CONTINUE TO INCREASE BY THE DAY AND IN MANY ZIP CODES AND NEIGHBORHOODS.
THESE NEEDS HAVE GONE UNADDRESSED FOR FAR TOO LONG ALREADY.
TO MEET THESE CHALLENGES, IT'S IMPORTANT THAT WE HAVE AN HONEST DISCUSSION ABOUT THE RESOURCES REQUIRED IN THE YEAR AHEAD AS WELL AS YEARS TO COME TO OPEN THIS DIALOGUE, THIS TRENDS REPORT IS INTENDED TO PROVIDE CITY COUNCIL WITH CONTEXT TO UNDERSTAND THE MAYOR'S PROPOSED BUDGET.
IT'S WORTH NOTING THAT THIS REPORT PLACES SIGNIFICANT EMPHASIS ON THE GENERAL FUND, UH, AND ITS REVENUE PROJECTIONS ADOPTING OUR CONSERVATIVE APPROACH THAT REFLECTS THE MOST RELIABLE ESTIMATES.
ONE THING IS CLEAR, WE MUST BE PROACTIVE IN ADDRESSING THESE CHALLENGES TO ENSURE THE LONG-TERM FINANCIAL HEALTH AND VIABILITY OF THE CITY OF HOUSTON.
MY OFFICE IS COMMITTED TO WORKING WITH THE MAYOR MEMBERS OF CITY COUNCIL AND STAKEHOLDERS FROM THROUGHOUT OUR COMMUNITY TO HELP FIND SOLUTIONS TO THESE CHALLENGES, TO FOSTER CONFIDENCE AMONG THE CITIES OF HU THE CITIZENS OF HOUSTON.
IT'S CRITICAL THAT WE PROMOTE INCREASED STANDARDS OF ACCOUNTABILITY, TRANSPARENCY, AND INNOVATION.
THROUGH A COLLABORATIVE APPROACH AND COMMITMENT TO THESE PRINCIPLES, WE CAN NAVIGATE THE FISCAL CHALLENGES AHEAD AND ENSURE HOUSTON'S FUTURE PROSPERITY.
AND WITH THAT, I'M PLEASED TO PRESENT THE TRENDS REPORT, IF WE CAN MOVE ONE SLIDE AHEAD.
SO, AS YOU CAN SEE HERE, UH, WE'LL BE COVERING QUITE A BIT TODAY, AND SO I'LL TRY TO MOVE THROUGH THIS EFFICIENTLY AND OF COURSE, HAPPY TO ANSWER ANY QUESTIONS, UH, THAT YOU MIGHT HAVE.
I DO WANNA WELCOME COUNCIL MEMBER FRED FLICKINGER, WHO'S JOINING US ONLINE.
GOOD MORNING, COUNCIL MEMBER FLICKINGER, IF WE CAN JUMP TO THE NEXT SLIDE, UH, WHICH WILL KICK US OFF WITH THE ECONOMIC OUTLOOK FOR THE CITY.
AS MANY AROUND THE HORSESHOE KNOW, THE HOUSTON ECONOMY HAS DEMONSTRATED REMARKABLE RESILIENCE IN ITS RECOVERY FROM THE COVID TO 19 PANDEMIC.
HOWEVER, TODAY WE SEE SIGNS OF A RETURN TO PRE PANDEMIC TRENDS.
FOR ONE, OUR HOUSING MARKET HAVING DEMONSTRATED SIGNIFICANT GROWTH THROUGH FISCAL YEAR 2021, UH, REFLECTS A STABLE OUTLOOK SIMILAR TO PRE COVID-19 NUMBERS AS UNCERTAINTIES AROUND THE FEDERAL RESERVE'S INTEREST RATE CONTINUE.
SIMILARLY, OIL PRICES HAVE ALSO EXHIBITED STABILITY, UH, BUT OUR LOCAL ECONOMY MUST TAKE EVERY STEP POSSIBLE TO DIVERSIFY OUR ECONOMIC BASE AND TO HEDGE AGAINST EXPOSURE TO RISKS ASSOCIATED WITH HEIGHTENED VOLATILITY.
RECENT FORECASTS FROM THE GREATER HOUSTON PARTNERSHIP INDICATE A POTENTIAL FOR SLOWDOWN IN REGIONAL EMPLOYMENT GROWTH THROUGH THE REMAINDER OF CALENDAR YEAR 2024, AND WE HAVE TO BE ON THE LOOKOUT FOR THAT.
AND FINALLY, PROJECTIONS SUGGESTS THAT INFLATION WILL CONTINUE TO TREND DOWNWARD IN FISCAL YEAR 2025, UH, WHICH IS A CONTRAST FROM A STRONG PEAK OF 8.2% SEEN IN FISCAL YEAR 2024.
THE CONTROLLER'S OFFICE IS PROJECTING A DECREASE IN OUR GENERAL FRONT REVENUE, UH, A DECREASE OF $88 MILLION TO BE EXACT IN FISCAL YEAR 2025.
UH, THE MAJOR DRIVER OF THIS BY FAR, UH, IS THE DROP OFF IN ARPA FUNDING.
UH, THAT WILL DECREASE BY $150 MILLION
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IN THE COMING FISCAL YEAR.UH, IT WILL BE OFFSET BY INCREASES IN OTHER AREAS.
IN PARTICULAR, A PROPERTY TAX REVENUE INCREASE OF $45 MILLION, A, A SALES TAX REVENUE INCREASE OF $5 MILLION.
UH, AN INTER FUND SERVICES INCREASE OF $4 MILLION, AN INCREASE IN THE CHARGES FOR SERVICES TOTALING $3 MILLION, AND AN INCREASE IN INTEREST TOTALING $2 MILLION.
I'D LIKE TO NOTE THAT PARTICULARLY AROUND SALES TAX, UH, OUR OFFICE WILL RETURN, UH, AT THE OUTSET OF THE FISCAL YEAR TO USING OUR CONSERVATIVE SCENARIO, WHICH PROJECTS $886 MILLION IN SALES TAX REVENUE.
WE'LL GO INTO THAT A LITTLE BIT MORE, UH, IN A MOMENT.
UH, OUR BASE CASE SCENARIO IS $921 MILLION, AND OUR OPTIMISTIC SCENARIO GETS CLOSE TO $940 MILLION.
HOWEVER, OUR SALES TAX RECEIPTS REMAIN OUR MOST REACTIVE ELASTIC, UH, AND VOLATILE REVENUE STREAMS OFTEN PRONE TO CHANGES IN THE INTEREST RATE ENVIRONMENT, CONSUMER SENTIMENT, BORROWING RATES, AND THE TAPERING OFF EFFECTS OF FEDERAL STIMULUS.
PROPERTY TAX REVENUE FOR FISCAL YEAR 25 IS PROJECTED TO BE 3.2% OR $45 MILLION HIGHER THAN FY 24.
MY OFFICE'S PROPERTY TAX REVENUE PROJECTION IS BASED ON THE PRELIMINARY PROP PROPOSITION, ONE CAP AMOUNT OF RIGHT AROUND $1.42 BILLION, WHICH INCORPORATES A 2023 INFLATION RATE OF THREE POINT A HALF PERCENT AND NO POPULATION GROWTH.
UH, I GOT NOTICED JUST THIS MORNING THAT OFFICIAL POPULATION GROWTH FIGURES HAVE COME BACK AND IT'S ROUGHLY ABOUT A HALF A PERCENT.
AND SO WHAT'S IN THIS REPORT, WE CAN EXPECT WILL INCREASE BY ABOUT $6 MILLION.
UH, WE STILL, UH, WILL WAIT TO SEE ON INFLATION RATE AND AS WE MOVE FORWARD, UH, THIS AMOUNT COULD BE HIGHER OR LOWER AS THE CERTIFIED ROLE WILL BE AVAILABLE, UH, IN THE EARLY FALL.
PROPERTY TAX REVENUES, AGAIN, CONTINUE TO BE AN AREA OF INTEREST FOR OUR OFFICE AS WE MONITOR THE EFFECTS OF STATE SENATE BILL TWO, UH, AND OUR PROPOSITION ONE REVENUE CAP.
UH, SO THIS LOOKS AT NOT JUST PROPERTY TAX REVENUE OVERALL, BUT THE PROPERTY TAX RATE.
UH, THE FY 25 PROPERTY TAX RATE FOR THE MOMENT IS BASED ON FISCAL YEAR 2024 RATE OF 51.92 CENTS PER $100 OF TAXABLE VALUE.
UH, AS YOU CAN SEE ON THIS SLIDE, UH, SINCE THE REVENUE CAP, UH, BEGAN TO IMPACT CITY OF HOUSTON PROPERTY TAXES, WE'VE SEEN THAT FOR NINE OUTTA THE LAST 10 YEARS, OUR PROPERTY TAX RATE HAS DECREASED.
WE DO EXPECT THAT THIS WILL CONTINUE AND THAT THE FY 2025 RATE WILL BE LOWER THAN THE FY 2024 RATE.
UH, BUT THIS WILL BE UPDATED ONCE THE CALCULATION IS FINALIZED AND WHEN THE APPRAISAL DISTRICT CERTIFIED ROLES ARE MADE AVAILABLE SOMETIME IN LATE AUGUST.
FOR SALES TAX, AGAIN, WE'RE USING OUR CONSERVATIVE PROJECTION HERE AND OUR OFFICE PROJECTS A SALES TAX REVENUE INCREASE OF LESS THAN 1%, WHICH WILL AMOUNT TO $5 MILLION.
SALES TAX HAS RECEIVED QUITE A BIT OF ATTENTION IN RECENT YEARS.
MY OFFICE CONSIDERS THE POSITIVE SALES TAX GROWTH SEEN IN RECENT YEARS TO BE NON-RECURRING, UH, AND A STRONG RESULT OF THE INFUSION OF FEDERAL STIMULUS DOLLARS INTO THE NATIONAL ECONOMY.
UH, IF YOU LOOK BACK OVER THE YEARS, YOU CAN SEE THAT INTEREST, PARDON ME, THAT SALES TAX RATES HAVE FLUCTUATED REGARDLESS OF THE PANDEMIC.
AND, AND SO WE SEE THIS AS NON-RECURRING, AND OUR PROJECTION IS ROUGHLY FLAT.
FRANCHISE FREE REVENUE IS ALSO STABLE, UH, DECREASING BY $1.4 MILLION OR 0.4% TOTAL.
FRANCHISE REVENUE HAS TRENDED DOWNWARD IN RECENT YEARS, UH, LARGELY AS A CUMUL CUMULATIVE RESULT OF STATE SENATE BILL 1152, WHICH RELATES TO THE TELECOMMUNICATIONS INDUSTRY STATEWIDE, AS WELL AS CONSUMERS BOTH MOVING AWAY FROM LANDLINES AND CUTTING THE CORD ON THEIR CABLE OR SATELLITE SERVICES AND MOVING TO DIGITAL STREAMING SERVICES.
FOR FISCAL YEAR 2025, THE GENERAL FUND TOTAL EXPENDITURE BUDGET IS EXPECTED TO INCREASE BY $75 MILLION OR AROUND 2.5% OVER FISCAL YEAR
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2024.THIS INCREASE IS LARGELY DRIVEN BY THE FOLLOWING, A $40 MILLION INCREASE IN DEBT SERVICES, PRIMARILY, PRIMARILY RELATED TO THE PROPOSED FIREFIGHTER SETTLEMENT.
A $40 MILLION INCREASE IN THE FIRE BUDGET, UH, WHICH LARGELY IS COMMITTED TO 10% PAY INCREASES AS WELL AS A $10 MILLION INCREASE, UH, IN SPECIAL PAY NEGOTIATED UNDER THE DRAFT COLLECTIVE BARGAINING AGREEMENT.
IT ALSO INCLUDES A $20,000,029 MILLION INCREASE IN THE POLICE BUDGET, PRIMARILY DUE TO 3.5% PAY RAISES, UH, THAT ARE, THAT EXIST UNDER THE EXISTING MEETING CONFER AGREEMENT.
AND FINALLY, $10 MILLION, UH, IN CONTINGENCY FUNDS.
THESE INCREASES ARE OFFSET BY A PROJECTED $23 MILLION REDUCTION IN GENERAL GOVERNMENT, PRIMARILY DUE TO ONE-TIME FUNDING IN 2024 FOR THE LOCAL DRAINAGE PROGRAM, AND A PROPOSED $12 MILLION REDUCTION ACROSS CITY DEPARTMENTS.
UH, WHILE THIS INCREASE IS MODEST YEAR OVER YEAR AS IT RELATES TO THE FISCAL YEAR OF 2024 BUDGET, THIS REFLECTS A 24% INCREASE COMPARED TO FISCAL YEAR 2021 WITHOUT SIMILAR INCREASES IN RECURRING REVENUE.
UH, AS IS FAMILIAR TO YOU, NEARLY $1.7 BILLION OR 55% OF GENERAL FUND TOTAL EXPENDITURES FOR FISCAL YEAR 2025 ARE COMMITTED TO POLICE, FIRE AND EMS. THE REMAINING AMOUNT REPRESENTS OTHER DEPARTMENTS CITYWIDE, UH, AND DEBT SERVICE AND PAY AS YOU GO.
MY OFFICE IS PROJECTING AN ENDING ENDING FUND BALANCE OF $248 MILLION FOR FISCAL YEAR 25 AS REQUIRED BY CITY ORDINANCE.
$189 MILLION OF THIS AMOUNT MUST BE KEPT IN RESERVE, LEAVING JUST $59 MILLION ABOVE THE REQUIRED TARGET OF HOLDING 77 7 0.5% OF EXPENDITURES, LESS DEBT SERVICE AND PAY AS YOU GO IN RESERVE.
SO NOW WE'LL MOVE OVER INTO ENTERPRISE FUNDS.
REVENUES AT THE AIRPORT SYSTEM ARE PROJECTED TO INCREASE $75 MILLION OR 12% TO $698 MILLION IN FISCAL YEAR 2025 ATTRIBUTABLE TO AN INCREASE IN OPERATING REVENUE.
AVIATION REVENUES ARE EXPECTED TO EXCEED EXPENDITURES FOR ANOTHER YEAR BY $139 MILLION IN FISCAL YEAR 2025.
DIGGING A BIT DEEPER, THE INCREASE REFLECTED ON THE LAST SLIDE IS WHOLLY ATTRIBUTABLE TO THE INCREASE OF $83 MILLION OR 14% IN OPERATING REVENUE INCREASES DUE TO HIGHER THAN PROJECTED, OR PARDON ME, HIGHER PROJECTED SIGNATORY LANDING AND TERMINAL SPACE RENTAL FEES.
ON THE DEBT SIDE AND EXPENSE SIDE, PROJECTED TOTAL EXPENSES FOR AVIATION FOR FISCAL YEAR 2025 ARE $559 MILLION, AN INCREASE OF 117 MILLION OR 26.3% COMPARED TO FISCAL YEAR 2024.
THIS INCREASE IS PRIMARILY DUE TO DEBT SERVICE TRANSFER OF $81 MILLION, AN INCREASE IN CONTRACTED SERVICES AND INTER FUND SERVICES BY $26 MILLION, AND AN INCREASE IN PERSONNEL COSTS BY $7 MILLION.
FOR CONVENTION AND ENTERTAINMENT, REVENUES ARE PROJECTED TO TOTAL $124 MILLION IN FISCAL YEAR 2025.
AN INCREASE OF 12 MILLION OR 10.5% COMPARED TO 24 CONVENTION AND ENTERTAINMENT IS PROJECTING AN INCREASE IN TOTAL EXPENSES AND DEBT SERVICE OF $12 MILLION OR 10.7%.
CONVENTION AND ENTERTAINMENT REVENUES ARE PROJECTED TO EXCEED EXPENSES BY APPROXIMATELY HALF A MILLION DOLLARS IN FISCAL YEAR 2025, RESULTING IN AN INCREASE IN ENDING TOTAL NET POSITION.
CONVENTION AND ENTERTAINMENT'S REVENUES ARE PRIMARILY GENERATED FROM HOTEL OCCUPANCY TAXES, WHICH IS REPORTED AS NON-OPERATING REVENUES.
CONVERSELY, FACILITY RENTALS AND PARKING ARE REPORTED AS OPERATING REVENUES.
REVENUES ARE PROJECTED TO TOTAL APPROXIMATELY $124 MILLION IN FISCAL YEAR 2025, AN INCREASE OF $12 MILLION YEAR OVER YEAR.
THIS INCREASE IS THE RESULT OF AN INCREASE OF 11 MILLION IN NON-OPERATING REVENUE DUE TO HOT TAX COLLECTION AND A $1 MILLION INCREASE AS A RESULT OF INCREASED PARKING REVENUE RESULTING FROM
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DOWNTOWN AREA WORKERS, COMMUTERS, AND VISITORS FULLY RETURNING TO PRE PANDEMIC ROUTINES.ON THE EXPENSE SIDE, CONVENTION AND ENTERTAINMENT IS PROJECTED IS PROJECTING AN INCREASE OF $12 MILLION OR 10.7%.
THIS INCREASE IS PRIMARILY DUE TO HIGHER TRANSFERS TO HOUSTON FIRST CORPORATION AND HIGHER DEBT SERVICE TRANSFER.
THE COMBINED UTILITY SYSTEMS REVENUES ARE EXPECTED TO INCREASE BY $127 MILLION OR 6.8% TO JUST OVER $2 BILLION.
EXPENSES ARE EXPECTED TO INCREASE BY $285 MILLION OR 16.5%, MAINLY DUE TO INCREASES IN TRANSFERS TO DEBT SERVICE AND CAPITAL PROJECTS, AS WELL AS INCREASES IN OPERATING EXPENSES SUCH AS PERSONNEL SUPPLIES AND CONTRACT SERVICES.
THE COMBINED UTILITY SYSTEM EXPENSES ARE PROJECTED TO EXCEED REVENUES BY JUST OVER $2 MILLION IN FISCAL YEAR 25, RESULTING IN A DECREASE IN ENDING TOTAL NET POSITION AND FUND BALANCE.
CUS REVENUES ARE EXPECTED TO INCREASE BY $127 MILLION COMPARED TO FISCAL YEAR 2024.
THIS INCREASE IS PRIMARILY DUE TO A PROJECTED INCREASE IN WATER AND SEWER SALES IN THE AMOUNT OF $133 MILLION.
THIS INCREASE IS OFFSET BY $6 MILLION, DECREASE IN WATER AND SEWER PENALTIES AND OTHER REVENUE FEES.
AND FINALLY, CUS EXPENSES ARE EXPECTED TO INCREASE BY $285 MILLION, UH, YEAR OVER YEAR FROM FISCAL YEAR 2024.
THIS INCREASE IS PRIMARILY DUE TO INCREASES IN OPERATING AND MAINTENANCE COSTS, OPERATING TRANSFERS AND DEBT SERVICE TRANSFERS.
AND THAT CONCLUDES OUR TRENDS REPORT.
I REALLY LIKE THE WAY YOU LAID THIS OUT.
I'VE SEEN A LOT OF TRENDS REPORTS THROUGH THE YEARS.
THIS IS A, THIS IS A REALLY GOOD PRESENTATION AND REALLY DUG DOWN DEEP INTO EACH OF THE CATEGORIES.
UM, APPRECIATE THAT VERY MUCH.
SLIDE NINE, I THINK YOU COULD PULL, OKAY, SO THIS LAYS OUT BASICALLY THE CHANGES, AND I'VE GOTTA REMEMBER WHAT MY QUESTION WAS ON THIS.
UM, I THINK YOU WERE, YOU WERE SAYING THAT THIS LEFT US WITH 51 MILLION OF ABOVE YOUR PROJECTIONS, AND MAYBE IT WASN'T THIS SLIDE, BUT YOUR, YOUR PROJECTIONS.
SLIDE 10 IF YOU MOVE, IS ONE MORE SLIDE, SLIDE 10.
I THINK, I THINK THE ADMINISTRATION'S SAYING LIKE 91 MILLION OVER THE 7.5% AND YOU'RE SAYING 51 MILLION, AND THAT'S JUST BASED ON THE MORE CONSERVATIVE SALES TAX REVENUE, BASICALLY.
THAT'S THE LARGEST DISTINCTION, YES.
AND, AND YOU WENT TO THE CONSERVATIVE, UM, SALES TAX, UM, PROJECTION, UH, RATHER THAN YOUR BASE OR OPTIMISTIC BASED ON WE WILL ALWAYS START OUT CONSERVATIVE.
AND HOPEFULLY AS WE SEE THOSE NUMBERS COME IN MONTH BY MONTH, WE CAN INCREASE TO THOSE OTHER SCENARIOS, BUT WE DO WANNA BE TRANSPARENT ABOUT WHAT THOSE OTHER SCENARIOS ARE.
AND HOW, HOW DO YOU FEEL ABOUT THE, THE, UM, DO YOU FEEL THAT IT WOULD BE A GOOD IDEA AND POTENTIALLY IT'LL DEFINITELY SAVE THE MONEY LONGER DOWN THE ROAD TO PUT MORE FUND BALANCE TOWARDS THE, THE SETTLEMENT, THE $650 MILLION TO PAY THAT DOWN? I MEAN, WHAT'S YOUR OPINION ON THAT? I'M JUST FLOATING IT.
UM, AND OTHER MEMBERS OF COUNCIL HAVE ASKED THAT QUESTION BEFORE.
FIRST OF ALL, THIS IS, YOU KNOW, IT'S YOUR POLICY DECISION TO MAKE RIGHT.
YOU KNOW, MY CONCERN IS KEEPING A HEALTHY FUND BALANCE MM-HMM
AND RIGHT NOW, AFTER PASSING THIS PROPOSED BUDGET, WE'RE GOING TO SPEND THAT DOWN SIGNIFICANTLY OVER THE, THE NEXT FISCAL YEAR.
UH, ANY ADDITIONAL EXPENDITURES OUT OF THAT FUND BALANCE GET US EVEN CLOSER TO THAT 7.5%, YOU KNOW, MINIMUM REQUIREMENT.
AND SO WHILE LET'S SAY THROWING 30 OR $50 MILLION AT THE SETTLEMENT WOULD, UH, DECREASE FROM BILLS AND INTEREST DOWN THE LINE, UM, IT WOULD MAKE OUR CURRENT FINANCIAL SITUATION, YOU KNOW, THAT MUCH MORE URGENT AND GIVE US LESS NEAR TERM FLEXIBILITY.
UM, VICE MAYOR PRO, THANK YOU AND THANK YOU CONTROLLER,
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UM, FOR THE PRESENTATION.UM, COUNCIL MEMBER ALCORN ASKED ABOUT THE SALES TAXES, AND I KNOW YOU SAID THAT THAT COULD CHANGE OVER TIME FOR THIS PROJECTION FOR SALES TAXES AND HOTEL OCCUPANCY TAXES.
HAVE YOU FACTORED IN THE UPCOMING CONVENTIONS AND, UM, SPORTS AND EVENTS THAT WE'RE GOING TO HAVE THIS NEXT FISCAL YEAR IN HOUSTON? OR IS THAT NOT FACTORED IN IN THIS PARTICULAR PROJECTION? UH, IT'S NOT FACTORED IN, UH, WHEN IT COMES TO SALES TAX REVENUES, WE, WE USE A MODEL THAT'S BASED ON EMPLOYMENT, UH, INFLATION OIL PRICES, UH, AND OTHER THINGS THAT HAVE HISTORICALLY TRIGGERED, UH, CHANGES IN SALES TAX.
WE, WE DON'T LOOK AT UPCOMING, YOU KNOW, ONE TIME REVENUE THAT HAVING BEEN SAID, WE'RE COMING OFF A STREAK OF A BASKETBALL CHAMPIONSHIP, A FOOTBALL CHAMPIONSHIP.
NONE OF THOSE THINGS ARE HAPPENING IN THE NEXT YEAR, THE FOLLOWING YEAR.
AND I DON'T KNOW WHEN THE DATES LINE UP, BUT WE HAVE WORLD CUP COMING UP AND THAT'S EXCITING.
BUT NONE OF THAT'S HAPPENING IN, IN THE NEXT YEAR.
SO THERE'S NOTHING THAT WOULD LEAD ME TO BELIEVE THAT THERE'S GONNA BE SOME, YOU KNOW, UNEXPECTED BUMP HERE.
SO THERE COULD BE A POSSIBILITY THAT THERE MIGHT BE SOME INCREASES, BUT NOT THE BIG BUMP THAT WE'VE SEEN WHEN OTHER SPORTS EVENTS HAVE BEEN HERE.
AND I'D LIKE TO WELCOME COUNCIL MEMBER JOAQUIN MARTINEZ, AND THANK YOU MADAM CHAIR AND COUNCIL MEMBER WILLIE DAVIS AND STAFF AND AND STAFF FROM DISTRICT B STAFF FROM DISTRICT G AND F.
AND GOOD MORNING TO ALL FOR GOOD MORNING, ALL OF MY COLLEAGUES.
THANK YOU MADAM CHAIR, AND GOOD MORNING CONTROLLER.
HOLLANDS, UH, KUDOS FOR THE PRESENTATION.
THIS IS THE BEST I'VE SEEN BEST LOOKING AS WELL.
SO REALLY APPRECIATE THIS AND, AND YOUR, UH, YOUR PRESENTATION.
SO JUST, JUST A COUPLE QUESTIONS.
YOU MENTIONED THE CITY REALLY NEEDS TO GET A HANDLE ON, ITS ON ITS, UM, DEFICIT AND, UH, LOOK TOWARD SOURCES OF, UH, REVENUE.
SO WHAT, WHAT DID YOU HAVE IN MIND AS FAR AS, UH, INCREASING REVENUE? THERE ARE A NUMBER OF OPTIONS, UM, THAT, THAT CAN BE EXPLORED.
UH, WHEN MELISSA HAS BEEN HERE TO TALK ABOUT THE FINANCES, SHE'S FLOATED GARBAGE FEES, SHE'S FLOATED, UH, PROPERTY TAX INCREASES RELATED TO, TO PUBLIC SAFETY.
UH, SHE'S FLOATED, UH, UTILITY CHARGES IN TERMS OF RIGHT OF WAY FOR THE WATER SYSTEM.
UM, ONE SIGNIFICANT OPPORTUNITY THAT WE'VE TALKED ABOUT QUITE A BIT THAT I HAVEN'T HEARD AS MUCH FROM THE MAYOR'S TEAM IS EXPLORING GRANT OPPORTUNITIES, UH, AND BEING MORE AGGRESSIVE IN PURSUING THOSE GRANTS THAN WE HAVE, UH, IN YEARS PAST.
BUT, YOU KNOW, THERE'S NO SILVER BULLET HERE, RIGHT? WHEN, WHEN YOU AND I ARE BALANCING OUR CHECKBOOKS AT HOME, IF OUR BILLS ARE OUTWEIGHING THE MONEY THAT'S COMING IN, WE EITHER GOTTA FIGURE OUT A WAY TO GET SOME MORE REVENUE, UH, YOU KNOW, THAT'S GETTING AN EXTRA JOB OR, OR, OR GOING AND NEGOTIATING A RAISE AT WORK, WHICH, WHICH I CAN'T DO BECAUSE MY SALARY'S STEP BY STATE LAW.
BUT, UM, YOU KNOW, OR IT'S TIGHTENING, YOU KNOW, YOUR BELT.
AND WE HAVE TO LOOK AT, AT BOTH OF THOSE OPTIONS, FIGURING OUT WAYS TO BE MORE EFFICIENT IN THE WAY THAT WE PROVIDE SERVICES TO THE CITY OF HOUSTON.
AND I COMMENTED IN MY NOTES, UH, THAT, YOU KNOW, THE NEEDS OF THE CITY ARE GROWING, RIGHT? THEY'RE NOT GETTING LESS RIGHT? AND SO WE HAVE TO BE REALISTIC ABOUT THAT AND UNDERSTAND THE COST OF PROVIDING THE QUALITY OF SERVICES THAT HOUSTONIANS DESERVE, UM, AND THEN BE REAL ABOUT WHAT THOSE COSTS ARE AND PURSUE REVENUE, UM, THAT'S GONNA PAY THE BILL.
UM, DO YOU FEEL THAT WE'RE CONTRIBUTING ENOUGH TO, OPE I'D HAVE TO CIRCLE BACK WITH YOU ON THAT AGAIN, IN TERMS OF WHAT IS PROVIDED TO, TO, YOU KNOW, FUTURE RETIREES, THAT'S GONNA BE A POLICY DECISION FOR YOU ALL AND FOR MEMBERS OF CITY COUNCIL FOR DECADES, UH, TO COME, YOU KNOW, IN TERMS OF FOCUSING, YOU KNOW, WE ARE ALWAYS GONNA BE LOOKING AT THE CRISIS THAT'S STARING US IN THE FACE, WHICH IS THAT IF WE WERE TO PASS A BUDGET LIKE THE ONE BEFORE US AGAIN IN FISCAL YEAR OF 2025, WE'D BE BANKRUPT OR ON THE VERGE OF IT, RIGHT? SO WE HAVE TO THINK ABOUT THAT.
UH, THE ED PIECE IS, IS SOMETHING THAT'S LINGERING OUT THERE AND WE HAVE TO BE RESPONSIBLE ABOUT THE LONG TERM, YOU KNOW, UH, SITUATION THAT THE CITY'S FACING AS WELL.
UH, BUT IT'S SOMETHING THAT I'D LIKE TO EXPLORE MORE IN, IN EITHER ADDITIONAL RESEARCH OR FURTHER CONVERSATION WITH YOU OFFLINE.
IN, IN LOOKING AHEAD TO, UH, YOUR NEXT PRESENTATION, I'M GONNA, UH, JUMP THE GUN HERE A LITTLE BIT.
AND ONE, ONE THING, UH, YOU MENTIONED THAT'S GONNA BE VERY IMPORTANT IS MAINTAINING OUR AAA RATING FROM, UH, FROM FITCH
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REGARDING OUR INVESTMENT PORTFOLIO.WHAT, WHAT DO YOU THINK, UH, WE NEED TO DO IN ORDER TO, UH, MAINTAIN THAT, THAT GOOD RATING? YEAH.
WELL, LET ME BE CRYSTAL CLEAR.
THE AAA RATING IS OUR INVESTMENT PORTFOLIO.
SO THIS IS VERNON MIDDLETON LEWIS DOING A GREAT JOB PUTTING THE CITY'S CASH AND CASH EQUIVALENTS OUT INTO THE MARKET AND GETTING A RETURN ON THAT.
IF YOU LOOK AT THE CITY'S DEBT PORTFOLIO AND THAT RATING, IT'S IN THE AA RANGE WITH THE VARIOUS AGENCIES.
UH, AND SO TO ANSWER THAT QUESTION, WE'VE, WE'VE HAD CONVERSATIONS WITH, UM, EACH ONE OF THE RATINGS AGENCIES, THEY HAVE SHARED THE THINGS THAT THEY LOOK AT, AND THIS IS SOMETHING THAT WE CAN SHARE WITH YOU OFFLINE, AND I'LL MAKE A NOTE TO SHARE IT WITH YOU.
BUT THEY'RE LOOKING AT DEBT COVERAGE RATIOS, THEY'RE LOOKING AT ECONOMIC GROWTH.
THEY'RE LOOKING AT WHETHER WE'RE PUTTING A PLAN IN PLACE TO ADDRESS SOME OF THE SCENARIOS THAT WE'RE IN.
YOU KNOW, THE, AS MUCH AS WE RING THE BELL ON THE, THE STRUCTURAL DEFICIT HERE, YOU LOOK AT LOS ANGELES, SAN FRANCISCO, NEW YORK, AND THEY'RE FACING SIMILAR CHALLENGES.
SO IT'S NOT LIKE WE'RE ALONE IN, IN THAT, BUT THE RATING AGENCIES WANNA SEE A PLAN TO ADDRESS IT, RIGHT? AND THIS BUDGET THAT WE'RE SEEING PROPOSED FOR FISCAL YEAR 2025, IT HAS OUR REVENUES DOWN AND OUR COSTS UP.
AND, YOU KNOW, OVER THE NEXT YEAR, WE'RE GONNA HAVE TO, TO TURN AROUND ON THAT AND WE'RE NOT GONNA HAVE A CHOICE.
THANK YOU, CHAIRWOMAN, UH, CONTROLLER.
FIRST, UH, I JUST WANNA SAY THANK YOU FOR THE PRESENTATION AND ALSO FOR, UM, YOU KNOW, HAVING YOUR STAFF COME AND VISIT, VISIT, UH, YOU KNOW, THEY WERE ASKING US, UM, OR ASKING ME WHAT AUDITS RIGHT NEED TO BE HAD, UM, AND, AND WE HAD A PRETTY GOOD CONVERSATION ABOUT A FEW DIFFERENT DEPARTMENTS.
AND, AND SO I SEE THAT THERE'S AN INCREASE IN AUDITS THAT, YOU KNOW, THAT ARE WE GONNA BE BUDGETED FOR.
WHAT DOES THAT, WHAT DOES THAT INCREASE? UM, HOW MANY MORE AUDITS ARE WE GONNA BE ABLE TO DO? UH, WHAT DOES THAT LOOK LIKE EXACTLY? SURE.
SO, UH, WE'RE, WE'RE JUMPING AHEAD INTO THE, THAT'S IN THE NEXT BUDGET WORKSHOP, BUT THAT'S, I'LL ANSWER THE QUESTION, UH, BUT WE'LL, WE'LL TALK A LOT MORE ABOUT THAT IN THE, MY NEXT PHASE OF PRESENTATIONS HERE IN A MOMENT.
UH, WHAT'S IN THE, THE, THE MAYOR'S PROPOSED BUDGET, UH, INCLUDES AN INCREASE THAT YOU ALL APPROVED BACK, UH, IN JANUARY OR FEBRUARY OF, UH, SIX ADDITIONAL POSITIONS FOCUSED ON PERFORMANCE AUDIT.
SO WHAT WE'VE HAD FOR YEARS IN THE CONTROLLER'S OFFICES AND AUDIT FUNCTION FOCUSED ON PROCESS AUDITS, THESE ARE THINGS LIKE CONFIRMING INVENTORY MANAGEMENT, UM, YOU KNOW, MAKING SURE THAT VARIOUS GUIDELINES ARE BEING FOLLOWED ACROSS THE CITY.
WE HAVEN'T PAID A LOT OF ATTENTION TO HOW EFFICIENT WE'RE BEING IN DELIVERING CITY SERVICES, HOW EFFECTIVE WE'RE BEING IF WE'RE FOLLOWING BEST PRACTICES OF OTHER, YOU KNOW, GLOBAL CITIES THAT HAVE DONE THINGS SUCCESSFULLY.
UH, THE NEW PERFORMANCE DIVISION THAT WAS APPROVED IN DECEMBER BY OUR PREVIOUS MAYOR AND CONTROLLER, UM, IS BEING ROLLED INTO THE FISCAL YEAR 2025 BUDGET.
AND THAT'S WHAT YOU SEE REFLECTED IN, IN THE MAYOR'S PROPOSED BUDGET.
I'LL DIVE MORE INTO IT IN THE NEXT BUDGET, UH, WORKSHOP.
BUT I, I GUESS THE OTHER QUESTION TOO, YOU KNOW, YOU MENTIONED THAT WE'RE AT 51 CENTS TO THE A HUNDRED DOLLARS NOW MM-HMM
UM, IF YOU SUBTRACT WHAT WE HAVE IN DEBT, UM, FROM THERE, WHAT IS, WHAT IS THAT ACTUAL NUMBER THAT WE CAN ACTUALLY USE, RIGHT? DO WE HAVE TO PAY PAY OUT OF THAT? UM, ANY BONDS THAT WE'VE, WE'VE ALREADY TAKEN OUT? CORRECT.
SO WE'RE, ARE WE CLOSER TO LIKE 31 CENTS THAT WE'RE TO A HUNDRED DOLLARS THAT WE'RE UTILIZING GENERAL FUND? SO I THINK WHAT YOU'RE ASKING IS WHEN WE TAKE OUR, OUR TAX RATE AND THEN CARVE OUT THE PIECE THAT SPECIFICALLY GOES TO DEBT SERVICE, WHAT'S LEFT? IS THAT THE QUESTION? CORRECT.
I WANNA SAY THE NUMBER IS 34 CENTS OR SO THAT'S LEFT OVER BY THE TIME I LEAVE THIS DESK.
I'M SURE MY TEAM WILL GIVE ME AN UPDATED FIGURE THAT I CAN SHARE WITH YOU.
UM, I THINK IT'S IMPORTANT TO HAVE THAT CONVERSATION AS WELL WITH THE COMMUNITY, BECAUSE IF YOU START, UM, ALIGNING THAT WITH OTHER MAJOR CITIES WHERE, WHERE ARE WE? EXACTLY, YOU KNOW, SOMETIMES FOLKS SAY, YOU KNOW, WE'VE ALREADY REDUCED THE TAX RATE, YOU KNOW, ALMOST 10 CENTS OVER THE LAST EIGHT, NINE YEARS OR SO MM-HMM
UM, AND, AND WE'RE CONTINUING TO DO THAT.
WE STILL NEED TO PROVIDE SERVICES.
I I FEEL LIKE THE CONVERSATION NOW IS COURSE CORRECTING FROM LIKE 20, 30 YEARS OF WHAT WE'VE BEEN DOING TO OURSELVES, UH, FINANCIALLY, SERVICES, LACK OF SERVICES.
UM, AND, AND, AND TO THAT POINT, I THINK AS WE, AS WE CONTINUE TO HAVE THIS CONVERSATION OF OTHER REVENUE SOURCES, WHETHER IT IS, UM, WE ARE, YOU KNOW, TALK, TALKING ABOUT PROPERTY TAX, UM, HOW DO WE DO THAT? UM, I'D, I'D LOVE TO MAKE SURE THAT WE'RE HAVING A REAL CLEAR CONVERSATION WITH THE COMMUNITY AS TO WHAT, WHAT DOLLARS ARE ACTUALLY GOING TO SERVICES, SPECIFICALLY WHAT'S GOING TO PAY FOR, YOU KNOW, PROJECTS THAT WE'VE
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ALREADY HAD OR PROJECTS THAT WE HAVE.UM, AND I'LL JUST CLOSE WITH THIS, UM, YOU KNOW, ARE, ARE ANY FUTURE PUBLIC MEETINGS, ENGAGEMENT MEETINGS TO HAVE THESE CONVERSATIONS FROM YOUR OFFICE? ARE THEY GONNA BE HAD, UM, OVER THE NEXT YEAR OR SO? YES.
SPECIFICALLY ON, ON THIS BUDGET, WE'VE HAD A CONTROLLER'S TOWN HALL THAT HAS NOW BEEN RESCHEDULED TWICE.
IT WAS SET FOR, I WANNA SAY LAST MONDAY, AND THEN IT WAS SET AGAIN FOR THE MONDAY BEFORE THAT
UH, CLEARLY THE CITY HAS BEEN, UM, YOU KNOW, DEVASTATED BY SOME SERIOUS WEATHER CHALLENGES, UH, INCLUDING I THINK 375 MILLION, 375,000 PEOPLE, UH, INCLUDING YOURS TRULY LOSING POWER EARLY, EARLIER THIS WEEK.
AND SO WE POSTPONED, UH, A CONTROLLER'S TOWN HALL, BUT THE INFORMATION THAT YOU SPEAK OF WAS, WAS IN THAT PRESENTATION.
AND WE PLAN TO GET THAT OUT TO THE PUBLIC SOON.
AND WE'LL CERTAINLY SHARE IT WITH EACH OF YOUR OFFICES BECAUSE, YOU KNOW, THE AVERAGE PERSON, THEY SAY, I PAY MY PROPERTY TAX BILL.
WE'RE GIVING Y'ALL ALL THIS MONEY.
AND WE DO, UH, BECAUSE I'M SEEING THE SLIDE IN MY HEAD THAT WE SAY, OF THE PROPERTY TAXES YOU'RE PAYING, THIS IS WHAT'S COMING TO THE CITY.
AND, AND HERE'S HOW MANY OF THOSE DOLLARS ARE GOING TO POLICE ARE GOING TO FIRE, AND HERE'S WHAT'S LEFT OVER FOR LIBRARIES, FOR PARKS, FOR THESE OTHER VARIOUS SERVICES.
AND SO, UH, WE'LL SHARE THAT WITH YOU AND WE WILL BE TALKING TO THE PUBLIC ABOUT IT VERY, VERY SOON.
AND WE'LL CONTINUE THOSE CONVERSATIONS OVER THE NEXT YEAR.
AND, AND WE, BECAUSE WE REALLY ARE GONNA HAVE TO START PAINTING THIS PICTURE TO THE PUBLIC, AND THAT WAS, I THINK WE HAD THE SAME IDEA TO, TO GET OUT TO THE PUBLIC AND, AND, UM, AND TALK ABOUT THIS.
'CAUSE EVENTUALLY, I, I MEAN, I DON'T REALLY SEE ANOTHER WAY EXCEPT FOR GOING TO THE, TO THE PROPERTY TAX, UM, CAP AT SOME POINT ON PUBLIC SAFETY.
AND I'D ADD INFRASTRUCTURE IN THERE TOO.
UM, BUT ANYWAY, CONTROLLER, THANK YOU, AS EVERYONE HAS SAID, UM, THIS IS AN EXCELLENT PRESENTATION AND LIKE I SAID, I'VE SEEN A LOT OF THESE AND THIS IS REALLY GOOD AND A LOT OF GR GREAT USEFUL INFORMATION ON HERE.
AND THANK YOU FOR YOU, TO, YOU AND ALL YOUR WONDERFUL STAFF FOR PUTTING ALL THIS TOGETHER.
AND I THINK WE HAVE SOME PUBLIC SPEAKERS, UM, ON THIS SECTION OF THE, OF THE MEETING.
UM, SEEING NOBODY ELSE IN THE QUEUE, WE'LL START WITH ALLEH NEWMAN, COME ON UP.
AND MADAM CHAIR, WILL I REMAIN HERE FOR THE PUBLIC SPEAKER? THINK YOU COULD GO, GO AHEAD AND STEP BACK.
AND THEN, UM, WE'LL BRING UP ALLEH.
IS SHE ONLINE? SHE'S NOT ONLINE.
SARAH'S ALSO NOT ON, NOT ONLINE AND NOT HERE.
UM, SANNA, AL, SHAR SANNA, SHAR SIGNED UP TO BE IN PERSON.
OKAY, WELL, ANYBODY ELSE WANNA SPEAK TO THE TRENDS REPORT? OKAY, SEEING NONE, WE WILL TAKE A SHORT BREAK AND THEN WE WILL START WITH THE CONTROLLER'S OFFICE.
UM, BUT FY 25 BUDGET PRESENTATION.