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FIRST 2026 BUDGET AND FISCAL AFFAIRS[Budget and Fiscal Affairs on September 1, 2026.]
COMMITTEE.I AM SALLY ALCORN, CHAIR OF THIS COMMITTEE, AND I OFFICIALLY CALL IT TO ORDER IF THERE ARE MEMBERS OF THE PUBLIC THAT WOULD LIKE TO SPEAK.
THERE'S A SHEET RIGHT AT THE FRONT TO SIGN UP FOR PUBLIC COMMENT, AND WE HAVE A FULL AGENDA.
SO WE'RE GONNA GET, UH, STARTED AND WE'LL START WITH THE MONTHLY FINANCIAL REPORT.
AND WELCOME WILL JONES AND MELISSA DEBOSKY.
AND MR. JONES, THE FLOOR IS YOURS.
LET ME WELCOME EVERYBODY AHEAD.
MY VICE CHAIR, MARIO CASTILLO, COUNCIL MEMBER TWILA CARTER, STAFF FROM COUNCIL MEMBER ALEJANDRO SALINAS'S, OFFICE STAFF FROM COUNCIL MEMBER MARTINEZ'S OFFICE AND ED POLLARD'S, OFFICE VICE MAYOR PROTE.
AMY PECK, MAYOR PRO TEM MARTHA CASTEX.
TATUM, COUNCIL MEMBER TIFFANY THOMAS.
COUNCIL MEMBER JULIAN RAMIREZ.
AND COUNCIL MEMBER FRED FLICKINGER.
I'M PLEASED TO PRESENT THE MONTHLY FINANCIAL REPORT FOR THE PERIOD ENDING JULY 31ST, 2026.
IN THE GENERAL FUND, THE CONTROLLER'S OFFICE IS PROJECTING AN ENDING FUND BALANCE OF 259 MILLION OR 9.9% OF EXPENDITURES, LESS DEBT SERVICE AND PAY AS YOU GO FOR FY 27.
THIS IS 45.5 MILLION LOWER THAN THE PROJECTION OF THE FINANCE DEPARTMENT.
THE DIFFERENCE IS DUE TO A LOWER REVENUE PROJECTION THAN THE FINANCE DEPARTMENT.
BASED ON OUR CURRENT PROJECTIONS, THE FUND BALANCE WILL BE APPROXIMATELY 62.5 MILLION ABOVE THE CITY'S TARGET OF HOLDING 7.5% OF TOTAL EXPENDITURES, EXCLUDING DEBT SERVICE AND PAYGO AND RESERVES.
THE FY 27 BEGINNING FUND BALANCE IS 12.4 MILLION HIGHER THAN THE FY 26 ENDING FUND BALANCE REPORTED IN THE JUNE MO FARM.
THE INCREASE IS DUE TO YEAR END ADJUSTMENTS TO REVENUES AND EXPENDITURES THAT WILL NOT BE FINAL UNTIL THE FY 26 ANNUAL COMPREHENSIVE FINANCIAL REPORT IS PUBLISHED.
THE FY 27 GENERAL FUND PROJECTION ASSUMES APPROXIMATELY 104 MILLION IN REVENUE ASSOCIATED WITH THE PROPOSED RIGHT OF WAY FEE.
BECAUSE OF IMPLEMENTATION, UH, OF THE FEE REMAINS UNCERTAIN, THIS REVENUE PRESENTS A SIGNIFICANT RISK TO THE PROJECTED ENDING FUND BALANCE.
IF THE RIGHT OF WAY FEE IS NOT IMPLEMENTED OR THE ANTICIPATED REVENUE IS NOT REALIZED, THE PROJECTED ENDING FUND BALANCE WILL BE REDUCED TO APPROXIMATELY 155 MILLION OR 5.9% OF EXPENDITURES, LESS DEBT SERVICE AND PAY AS YOU GO.
THIS WOULD PLACE A GENERAL FUND BELOW THE CITY'S 7.5%, UM, RESERVE TARGET REQUIRING THE CITY TO IDENTIFY AN ALTERNATIVE REVENUE SOURCE OR REDUCE FY 27 EXPENDITURES, EXPENDITURE BUDGET TO RESTORE RESERVES.
WE ARE PROJECTING NO CHANGES FROM THE ADOPTED BUDGET AMOUNTS AND THE ENTERPRISE FUNDS.
SO MOVING ON, UH, TO, UH, COMMERCIAL PAPER BONDS.
THE CITY'S PRACTICE HAS BEEN TO MAINTAIN NO MORE THAN 20% OF THE TOTAL OUTSTANDING DEBT FOR EACH TYPE OF DEBT IN A VARIABLE RATE STRUCTURE.
AS OF JULY, ALL OUTSTANDING DEBT IS WITHIN THAT THRESHOLD.
IN CLOSING, I WANNA TOUCH ON THE THIRD AMENDMENT TO THE REGIONAL PARTNERSHIP AGREEMENT THAT I KNOW DIRECTOR DECI IS GOING TO SPEAK IN A LITTLE MORE DETAIL.
UM, I DID WANNA SHARE A LITTLE BIT OF THE CONTROLLER'S OFFICE PERSPECTIVE ON THAT.
SO WITH THIS PROPOSED AGREEMENT, HOUSTON WOULD RECEIVE A TOTAL OF 50 MILLION, UH, THROUGH 2030 WITH 20.2 MILLION OF WHICH WOULD COME FROM MONEY ALREADY IN THE FUND BALANCE, UM, AND 29.8 MILLION IN THE AGREED AMOUNT OF FUTURE DEPOSITS.
AND AGAIN, DEPENDING ON WHEN YOU LOOK AT, UH, THE FUND BALANCE, UM, I KNOW BASED ON THE AGREEMENT IT'S GONNA BE 22.6 MILLION, UH, THAT WILL BE TRANSFERRED BY, UH, DECEMBER, WHICH IS THE PLAN, AND THEN ANOTHER 27 OR SO MILLION BY 2030.
AND ALSO WITH THAT AGREEMENT THAT UN RESTRICTS THE FUND SO THAT THE CITY CAN USE THEM, UM, AS THE CITY SEES NECESSARY, AND WHICH IT WILL BE COMING TO THE GENERAL FUND THAT WE SEE FROM THE, UM, THE AGREEMENT, THE RCA.
SO THAT WILL BE REVENUE COMING DIRECTLY INTO THE GENERAL FUND UNRESTRICTED.
UH, AND JUST TO GIVE A LITTLE CONTEXT SINCE WE REVIEWING THE, THE FUND STRUCTURE, IF THE CURRENT RPA REMAINED IN PLACE THROUGH FY 27, UH, PROJECTED SALES TAX WOULD ESTIMATE AROUND 75.6 MILLION.
UM, AND THAT ASSUMES IF THERE WERE NO GROWTH.
SO ESSENTIALLY WE JUST RECEIVED THE SAME AMOUNT OF SALES TAX THAT WE RECEIVED AT THE END OF 26.
UM, OR IF YOU DO A RANGE TO WHERE, UH, LOOKING AT THE ANNUAL GROWTH RATE, IT'S BEEN ABOUT 5.5%, CLOSE TO 5.6%.
SO YOU LOOK AT WHERE WE STARTED IN 2009 TO WHERE WE ARE, UM, IN 2026, IT'S ABOUT 5.5%.
SO IF YOU WERE TO ASSUME THROUGH 2057,
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WE COULD REACH, UH, 5.5%, WHICH IS ON THE HIGHER END, UH, THERE'D BE ABOUT 201 MILLION OF OF SALES TAX REVENUE THAT WOULD'VE BEEN, UH, COLLECTED.AND AGAIN, YOU CAN DO DIFFERENT SCENARIOS.
UM, I'LL TALK LATER ABOUT SALES TAX.
IT IS A VOLATILE REVENUE SOURCE.
UM, SO YOU GOTTA BE CAREFUL WITH THOSE PROJECTIONS.
BUT I DID WANT TO GIVE SOME CONTEXT ON, YOU KNOW, IF YOU WERE TO LOOK AT IT FROM THAT ANGLE.
UM, AND IN ADDITION, UH, THESE AMOUNTS, THE FUND ALSO HOLDS ABOUT 4 MILLION IN INTEREST THAT, AGAIN, ON, BASED ON THE AGREEMENT, THAT WOULD BECOME UNRESTRICTED.
SO THE CITY WOULD HAVE ACCESS TO THE, THE INTEREST PORTION AS WELL.
UM, SO ALSO LOOKING AT THE HISTORICAL ACTIVITY ON THE EXPENDITURES FROM THE FUND, IT'S BEEN MINIMAL IN THE PAST FEW YEARS.
UH, SINCE 2021, THERE HAS BEEN LITTLE, UH, LITTLE TO NO SPENDING.
SO TOTAL EXPENDITURE SINCE 2009 AMOUNT TO ROUGHLY 23 MILLION.
UM, WILL, CAN I STOP YOU RIGHT THERE, UHHUH? I MEAN, I NOTICED THAT TOO.
SO THE EXPENDITURES KIND OF STOPPED.
DO YOU REMEMBER WHY THEY STOPPED? I DO NOT REMEMBER WHY THEY STOPPED.
UM, WERE YOU AWARE OF THIS AGREEMENT WHEN YOU WERE FINANCE DIRECTOR? I WAS, I WAS AWARE OF IT, UM, BUT DID NOT HAVE A LOT OF, UH, INVOLVEMENT IN TERMS OF WHEN PROJECTS WERE SELECTED OR, UH, THE, THE CAPITAL IMPROVEMENT SIDE OF IT.
UM, THAT WAS MORE ON DIRECTOR AKIS SIDE, BUT I DON'T, I DON'T RECALL, UM, A LOT OF ACTIVITY OR EVEN A LOT OF DISCUSSION AROUND IT, TO BE HONEST.
UM, BUT LIKE I SAID, SINCE 21, IT'S BEEN LITTLE TO NO, UM, SPENDING ACTIVITY ON IT.
UM, AND WHEN YOU LOOK AT, UH, YOU KNOW, SOME OF THE PROJECTS THAT WE DID SPEND ON, UH, AND I'M SURE DIRECTOR BASON MAY TOUCH ON SOME OF THOSE TOO, LIKE NORTH MCGREGOR WAY, HOLCOMB RECONSTRUCTION, UM, ALAMEDA ROAD, RECONSTRUCTION, LAKE HOUSTON PARK, AND OF COURSE THERE ARE, THERE ARE OTHER PROJECTS.
UM, SO THAT'S JUST TO NAME A FEW.
UM, BUT ANYWAY, I JUST WANTED TO GIVE SOME, SOME PERSPECTIVE FROM THE CONTROLLER'S OFFICE ON, ON THE, UH, FINANCIAL SIDE OF THAT.
UM, AND SO YEAH, THAT CONCLUDES MY REPORT.
THIS IS THE ONE PLUS 11 FINANCIAL REPORT FOR THE PERIOD ENDING JULY 31ST, 2026.
FISCAL YEAR 27 PROJECTIONS ARE BASED ON ONE MONTH OF ACTUAL RESULTS AND 11 MONTHS OF PROJECTIONS IN THE GENERAL FUND FOR FISCAL YEAR 26 IN ACCORDANCE WITH GOVERNMENT ACCOUNTING STANDARDS FOR GOVERNMENT FUNDS.
THE FINAL REVENUES FOR FISCAL YEAR 26 WILL INCLUDE REVENUES EARNED THROUGH JUNE 30TH, ONLY IF THEY ARE COLLECTED BY THE END OF AUGUST.
EXPENDITURES THROUGH JUNE 30TH WILL INCLUDE SPENDING INCURRED BEFORE THE END OF JUNE.
AND THESE EXPENSES CONTINUE TO BE RECORDED AS ACCRUALS.
THE CURRENT PRELIMINARY UNDESIGNATED FUND BALANCE FOR THE GENERAL FUND IS PROJECTED TO BE 332 MILLION, WHICH IS APPROXIMATELY 6.7 MILLION HIGHER THAN OUR JUNE MOFA PROJECTION.
AND AGAIN, THESE RESULTS ARE NOT FINAL UNTIL THE PUBLICATION OF THE FISCAL YEAR 26 ANNUAL COMPREHENSIVE FINANCIAL REPORT, WHICH SHOULD BE TOWARDS THE END OF THIS CALENDAR YEAR FOR FISCAL YEAR 27.
OUR REVENUE AND EXPENDITURE PROJECTIONS REMAIN AT BUDGET.
UM, AND SO THERE'S NO CHANGES, UH, FOR THIS MONTH'S MOFA.
UM, BUT JUST TOUCHING ON THE SALES TAX, UM, AND AGAIN, THIS IS, ALTHOUGH WE FOUND THIS INFORMATION, YOU KNOW, SINCE THE PREVIOUS MO THESE ARE SALES TAX RECEIPTS THAT ARE DUE TO, UH, FISCAL YEAR 26 ACTIVITIES.
BUT SALES TAX RECEIPTS FOR THE MONTH OF JUNE WERE 90.9 MILLION, OR ABOUT 6.6 MILLION, UM, HIGHER THAN THE SAME PERIOD LAST YEAR, AND ABOUT 12.5 MILLION HIGHER THAN THE BUDGET.
UM, AND THIS REPRESENTS ABOUT 7.77% HIGHER THAN THE SAME PERIOD LAST YEAR.
UM, AND SO THAT'S HOW, UH, JUNE ENDED.
AND WE HAVEN'T RECEIVED THE JULY SALES TAX NUMBERS YET.
UM, BUT GOING INTO THE FISCAL YEAR 27, BASED ON THE BUDGETED SALES TAX AMOUNT OF 942 MILLION, UM, THAT WOULD REPRESENT ACTUALLY A DECREASE FROM FISCAL YEAR 26 ACTUAL.
SO WE DO FEEL COMFORTABLE THAT OUR FISCAL YEAR 27, UM, SALES TAX BUDGET IS CONSERVATIVE, BUT WE'LL CONTINUE TO MONITOR AND, UM, GIVE MONTHLY UPDATES AT THE MONTHLY FINANCIAL REPORT.
UM, SO JUST TOUCHING ON WHERE WE SEE THE FUND BALANCE, UH, BEING FOR FISCAL YEAR 27, WE'RE CURRENTLY PROJECTING THE ENDING FUND BALANCE TO BE, UH, 304.5 MILLION, WHICH IS 31.6 MILLION HIGHER THAN THE ADOPTED BUDGET, AND 11.6% OF ESTIMATED EXPENDITURES NOT INCLUDING DEBT SERVICE AND PAY AS YOU GO.
THAT FUND BALANCE IS 108 MILLION ABOVE THE TARGET OF HOLDING 7.5% OF EXPENDITURES, NOT INCLUDING DEBT SERVICE AND PAY AS YOU GO.
AND FOR THE ENTERPRISE SPECIAL REVENUE AND OTHER FUNDS, WE'RE NOT PROJECTING ANY FORECASTED CHANGES, UH, FOR THIS PERIOD.
ANY QUESTIONS, COLLEAGUES FOR THE MONTHLY FINANCIAL REPORT? ANY PUBLIC SPEAKERS ON THE MONTHLY FINANCIAL REPORT? COME ON UP.
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UH, FIRST OF ALL, THE UH, $31 MILLION DIFFERENCE IN THE, UH, FUND, UH, BEGINNING BALANCE IS A LOT BETTER THAN THE A HUNDRED MILLION DOLLARS, UH, THAT WAS LAST YEAR.
WE'RE USED TO SEEING THOSE BIG NUMBERS SO THAT THAT DID COME DOWN.
AND, UH, THERE WAS A $37 MILLION VARIANCE BETWEEN THE CONTROLLER AND THE FINANCE, UH, DEPARTMENT ON PROPERTY TAXES.
AND RATHER THAN JUST SLIDE OVER THAT AND SAY WE HAVE A DIFFERENCE IN THAT, IT WOULD BE NICE TO HAVE A DISCUSSION OF WHY THIS EARLY IN THE YEAR THERE IS THAT BIG OF A DIFFERENCE.
WE CAN ASK THAT QUESTION, GET YOU AN ANSWER.
COME ON BACK FOR THE REST OF YOUR PUBLIC COMMENT.
UM, DIRECTOR DEBOWSKI WILL REJOIN US AND WE WILL MOVE ON TO AGENDA ITEM THREE, DISCUSSION OF PROPOSED THIRD AMENDMENT TO THE REGIONAL PARTICIPATION AGREEMENT WITH THE WOODLANDS.
AND I'D ALSO LIKE TO MAKE SURE I WELCOME I THINK COUNCIL MEMBER TIFFANY THOMAS, COUNCIL MEMBER WILLIE DAVIS, UM, ANYBODY, UM, COUNCIL MEMBER ED POLLARD, UM, TO THE HORSESHOE.
UH, SO ON THE AGENDA FOR THIS PRESENTATION IS TO, UM, GIVE A BRIEF OVERVIEW OF THE PROPOSED THIRD AMENDMENT TO THE WOODLANDS REGIONAL PARTICIPATION AGREEMENT.
SO ON THE NEXT SLIDE, WHICH IS SLIDE THREE, JUST FOR A LITTLE BIT OF BACKGROUND, UM, BACK IN 2007, THE CITY AND THE WOODLANDS, UH, ENTERED INTO A REGIONAL PARTICIPATION AGREEMENT, UM, ON, IN NOVEMBER OF 20, UH, 2007.
UM, AT THAT TIME, THERE HAVE BEEN A COUPLE AMENDMENTS SINCE THEN.
UH, IT WAS AMENDED BACK IN 2010 AND AGAIN IN 2014.
UM, AND JUST SOME OF THE HIGH LEVEL BASICS OF THE AGREEMENT IS THAT THE AGREEMENT ESTABLISHED THE REGIONAL PARTICIPATION FUND, UM, WHICH IS A FUND THAT IS A SPECIAL REVENUE FUND THAT WE HOLD AT THE CITY.
UM, AND THAT FUND, UH, RECEIVED, UM, DEPOSITS INTO IT TO PAY FOR SHARED PROJECTS WITHIN THE CITY, UM, LIMITS.
AND BASED ON THE AGREEMENT, UM, THE, THE BASE AGREEMENT AND THEN INCORPORATED WITH THE FIRST TWO AMENDMENTS THAT THE DISTRICT, UM, PROVIDED SALES TAX REVENUE IN THE AMOUNT OF ONE 16TH OF THEIR 1%, AND THEY WOULD SEND THAT FUNDING TO THE CITY ON A QUARTERLY BASIS IN A, IN A CITY MANAGED FUND.
UM, IN EXCHANGE FOR THAT, THE CITY AGREED, UH, NOT TO ANNEX THE AREA OF THE WOODLANDS FOR A PERIOD OF 50 YEARS.
SO ON THE NEXT SLIDE, THIS GIVES SOME, UM, UH, EXAMPLES OF SOME OF THE PROJECTS THAT WERE FUNDED USING THE WOODLANDS FUND.
AND I KNOW WE PROVIDED A LIST, A COMPREHENSIVE LIST OF PROJECTS WITH ALL THE DOLLARS AMOUNT, UH, SPENT ON EACH OF THESE PROJECTS, UM, LAST WEEK, UM, AT THE TIME THAT THE ITEM WAS ON CITY COUNCIL AGENDA.
UM, SO THIS JUST GIVES YOU AN OVERVIEW.
UM, THESE PROJECTS ARE IN LINE WITH, UM, WHAT WE CALL EXHIBIT B, WHICH IS AN, UM, UH, UH, EXHIBIT TO THE ORIGINAL AGREEMENT.
AND BASICALLY THAT EXHIBIT B HIGHLIGHTS THE PROJECTS THAT SHOULD BE, UM, LOOKED AT TO BE FUNDED WITH THAT FUND, UM, AS AGREED TO INITIALLY BETWEEN THE CITY AND THE WOODLANDS, UM, BACK IN 2007.
SO ON THE NEXT SLIDE, UM, THE ITEM THAT WAS BEFORE CITY COUNCIL LAST WEEK FOR CONSIDERATION AND WILL BE, UM, COMING AGAIN TOMORROW, UM, IS THE THIRD AMENDMENT TO THE AGREEMENT, UM, THAT WAS NEGOTIATED BETWEEN THE CITY AND THE TOWNSHIP.
UM, AND THAT THIRD AMENDMENT TO THE AGREEMENT, UM, BASICALLY WILL FREE UP THE FUNDS THAT WERE PREVIOUSLY RESTRICTED TO BE USED ONLY ON CERTAIN TYPES OF PROJECTS AS AGREED TO BETWEEN THE CITY AND THE TOWNSHIP.
UM, AND THOSE, UM, IT WOULD, SO IT WOULD FREE UP THE FUNDS THAT WE EXISTING HAVE EXISTING IN THE, IN THE FUND, AS WELL AS SEND ADDITIONAL, UM, SUPPLEMENTAL PAYMENTS TO THE CITY, UM, DURING 20 27, 20 28, AND 2029, UM, FOR A TOTAL AMOUNT OF $50 MILLION.
UM, AS YOU CAN SEE IN THE, IN THE DETAIL OF THE THIRD AMENDMENT, AND ALSO ON THIS SLIDE, UM, THE INITIAL ALLOCATION THAT WILL COME TO THE GENERAL FUND IS $22 MILLION, AND THEN IN, UM, DECEMBER OF 27 AND 28, $9 MILLION, AND THEN THE FINAL PAYMENT IN DECEMBER OF 29, THAT WOULD TOTAL OUT TO THE 50 MILLION.
AND THEN THE OTHER PIECE OF THE, UM, AMENDMENT THAT, UM, WAS TALKED ABOUT IS THAT INSTEAD OF THE LIMITATION TO NOT ANNEX THE WOODLANDS FOR A PERIOD OF
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50 YEARS, THAT WILL, UM, HAVE AN UNLIMITED TERM.UM, I ALSO WANNA NOTE THAT THE LEGISLATIVE, UH, STATE LAW HAS CHANGED.
I, I'M NOT AN ATTORNEY, I KNOW WE DON'T HAVE ANYONE HERE FROM THE, UM, FROM THE LEGAL DEPARTMENT TODAY.
BUT, UM, THE LAW HAS CHANGED SINCE THE TIME OF THE ORIGINAL AGREEMENT.
AND IT IS OBVIOUSLY MUCH MORE DIFFICULT TO ANNEX AREAS, UM, NOW THAN IT WAS PREVIOUSLY.
UM, THERE'S AN, THERE'S AN ENTIRE PROCESS LAID OUT IN STATE LAW.
UM, AND SO, UH, WE DON'T, UH, YOU KNOW, WE DON'T FORESEE US ANNEXING THEM, BUT THIS IS SOMETHING THAT, UM, UH, CLARIFIES THAT IN THE AGREEMENT.
SO WHEN THIS FIRST CAME UP, I, WELL, THE QUESTION THAT I ASKED, UM, WILL JONES, UM, AND YOU WERE, YOU WERE IN THE FINANCE DEPARTMENT TOO MM-HMM
UM, DO YOU KNOW WHY WE KIND OF STOPPED USING THIS FUND IN 2020? SO WE HAD, BASICALLY, THE WAY THE AGREEMENT WORKED WITH THE WOODLANDS IS THAT THE CITY WOULD SEND REQUEST LETTERS TO THE TOWNSHIP FOR, UH, PROJECTS TO BE USED FROM THAT FUND.
UM, IN MY RECOLLECTION, AND THIS IS GOING BACK RIGHT YEARS AGO, 'CAUSE I THINK YOU SAW THE LAST PROJECT ON THE LIST THAT WAS BUDGETED WAS OVER SIX YEARS AGO.
UM, IN MY RECOLLECTION, IT WAS, UM, DIFFICULT BETWEEN THE WOODLANDS TOWNSHIP AND THE CITY TO AGREE ON PROJECTS THAT THE FUND COULD BE USED ON.
UM, WE HAVE EXHIBIT B AS THE GUIDELINES, BUT ANOTHER PIECE OF IT WAS THAT THE WOODLANDS, UM, REQUIRED THAT THE CITY HAVE MATCHING FUNDS TO GO TOWARDS A PROJECT.
SO LET'S SAY WE WANTED TO USE A MILLION DOLLARS OUT OF THE FUND FOR, UM, SOMETHING, UH, YOU KNOW, A PROJECT THAT'S PURSUANT TO EXHIBIT B.
THE WOODLAND SAID, OKAY, GOOD, BUT WHERE'S YOUR MILLION DOLLAR MATCHING FUND? RIGHT? SO IT BECAME DIFFICULT TO KIND OF FIND THE MATCHING RESOURCES AND TO IDENTIFY PROJECTS THAT ALIGNED WITH THE AGREEMENT.
SO WERE, WERE WE SENDING REQUESTS? I MEAN, DO YOU, WERE THERE REQUESTS SENT THAT WERE, WERE, UM, DENIED OR, OR DID WE NOT SEND REQUESTS BECAUSE WE KNEW THAT WE DIDN'T HAVE THE MATCHING FUNDS? I THINK THAT'S, COULD WE HAVE USED CIP FUNDS AS MATCHING FUNDS? YOU KNOW, SOME, WE HAVE, WE HAVE USED CIP P FUNDS, A PROJECT THAT WAS IN THE CIP TO USE AS A MATCHING FUND.
WE, WE HAVE IN THE PAST, THAT'S WHERE THE MATCHING FUNDS RIGHT.
FOR THESE PROJECTS CAME FROM AT THE TIME.
AND AGAIN, I'M, THIS IS MY RECOLLECTION FROM SURE.
SO IT, BECAUSE IT SEEMS LIKE I WOULD LOOK AT THE CIP AND THINK, WELL, THIS IS GONNA TAKE MORE MONEY.
MAYBE I'LL TRY TO GET SOME OF THE WOODLANDS MONEY
I THINK IT WAS MORE IN THE CONVERSATIONS WITH THEM THAT, YOU KNOW, WE TRIED TO, OKAY.
WE TRIED TO SEND THEM REQUESTS THAT THEY WERE GOING TO ULTIMATELY APPROVE.
AND, AND THE OTHER BIG QUESTION I HAD WHEN, WHEN WE WERE BRINGING THIS UP IS KIND OF LIKE, WHAT, YOU KNOW, WHAT MONEY ARE WE MISSING OUT ON? MM-HMM
YOU KNOW, BY DOING THIS AND YOU GUYS SENT OVER A CHART, UM, USING A 3% DISCOUNT RATE, UH, PAYMENTS, IF YOU WENT ALL THE WAY TO THROUGH, YOU KNOW, 20 57, 20 58, IT'S 132.6 MILLION MM-HMM
PRESENT VALUE WOULD BE 51 MILLION Y.
DO I HAVE THOSE NUMBERS RIGHT.
AND I THINK, UM, AT LEAST, AND I HAVEN'T SEEN ANY OF THE ANALYSIS THAT THAT, UM, MR. JONES MENTIONED, BUT I DIDN'T HEAR HIM TALK ABOUT THE DISCOUNT RATE.
SO THAT'S A BIG PIECE OF IT IS, YOU KNOW, THE TIME VALUE OF MONEY.
BECAUSE HE SAID 200 MILLION THAT WE HAVE, SO THEY'RE OBVIOUSLY, THEY DISCOUNTED BACK YEAH.
WE, WE HAVE TO MATCH THE FUNDS, UM, AND WE HAVE TO BE AGREED UPON, AND NOW WE GET BASICALLY WHAT THE PRESENT VALUE IS, UM MM-HMM
AND THE FUNDS WILL BECOME UNRESTRICTED AND UNRESTRICTED.
UH, THERE WAS NOBODY IN THE QUEUE WHEN I FIRST STARTED ASKING QUESTIONS.
I USUALLY LET EVERYBODY ELSE GO FIRST.
SO NOW I'LL, I'LL SKIP TO EVERYBODY ELSE.
THANK YOU, COUNCIL MEMBER AND, AND THANK YOU DIRECTOR FOR BEING HERE TODAY.
UH, IS THE MATCHING FUND REQUIREMENT CODIFIED IN THE RPA? IS THAT, I'LL HAVE TO GO BACK AND LOOK.
I CAN'T, THIS IS MY MEMORY FROM SIX YEARS AGO, SO I'D HAVE TO GO BACK AND LOOK AND SEE IF THE MATCH, JUST CURIOUS IF IT'S MORE OF LIKE A SUGGESTION FROM THE TOWNSHIP OF THE WOODLANDS, OR IF IT'S ACTUALLY CODIFIED AND, AND A REQUIREMENT FOR THE FUNDS TO BE, TO BE USED, UM, FROM YOUR LEC, FROM YOUR RECOLLECTION OF THE PAST, UH, UH, COUPLE YEARS NOW, HAS THE CITY ATTEMPTED TO SUBMIT PROJECTS TO THE WOODLANDS AND THE PARTIES COULD NOT REACH AN AGREEMENT? ARE THERE ANY PROJECTS MAYBE LIKE SPECIFICALLY? NOT TO MY KNOWLEDGE IN THE LAST COUPLE YEARS, NO.
UM, IS THERE AN ANTICIPATED USE FOR THESE FUNDS, UH, IF WE WERE TO MOVE FORWARD WITH THIS AGREEMENT, UM, FOR THE $15 MILLION TO COME INTO THE GENERAL FUND OVER THE NEXT COUPLE OF YEARS, IS THERE A SPECIFIC USE FOR THOSE FUNDS AS OPPOSED TO, SO THE PLAN IS TO BRING IT INTO THE GENERAL FUND, UM, REALLY TO HELP SHORE
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UP THE FUND BALANCE FOR THE GENERAL FUND.UM, AND THEN I GUESS LAST QUESTION FROM ME, UM, CAN WE MAYBE GO BACK TO THE LIST OF THE PROJECTS WE HAD THERE? WAS THIS A LIST OF PROJECTS ACTUALLY ALREADY COMPLETED FROM THE WOODLAND FUNDS? OKAY.
DO WE HAVE, UH, AN IDEA OF THE AMOUNT OF, SO FOR EACH ONE OF THESE PROJECTS, THE CITY OF HOUSTON WAS THROWING IN 50% OF THE CONSTRUCTION COSTS? YES.
AND THEN I GUESS LAST QUESTION THEN.
UM, THE, THE AGREEMENT IS IN PERPETUITY, THERE IS NO REVERSAL OF THIS.
THEN IF WE WERE TO, YOU KNOW, CAN WE EVER GO BACK AND AMEND THE ITEM TO REVERSE OUR COUNSEL'S DECISION IF VOTED ON? I THINK THAT AGREEMENTS CAN ALWAYS BE AMENDED BETWEEN THE TWO PARTIES.
I'M NOT, I'M NOT FROM LEGAL, BUT THAT'S MY UNDERSTANDING.
I MEAN, I HAVE TO BE, GO BACK TO THEIR BOARD AND COME BACK TO THIS BODY FOR AN AMENDMENT.
DIRECTOR FOR THE 22 MILLION THAT WE WOULD GET IN FISCAL YEAR, THIS CURRENT FISCAL YEAR.
WHAT WOULD THAT DO TO OUR GAP ONCE THAT MONEY IS, IS MM-HMM
RECEIVED? SO BASICALLY THE WAY THE, UM, THE WAY THE BUDGETARY GAP LOOKED LIKE WHEN WE ADOPTED THE BUDGET IS WE HAD A $25 MILLION, UM, SHORTFALL THAT WE HAVE TO, YOU KNOW, DRAW FROM FUND BALANCE TO CLOSE THAT LAST LITTLE BIT OF GAP.
SO IT BASICALLY BRING THAT GAP DOWN TO $3 MILLION.
AND THE DISCOUNT RATE THAT WAS MENTIONED BASED ON FUTURE PROJECTIONS, I, I'M NOT TOO CLEAR ON THAT.
CAN YOU HELP ME UNDERSTAND WHAT THAT IS? MM-HMM
HOW THAT, HOW THAT WORKS? YEAH.
SO I THINK, UM, WHAT MR. JONES MENTIONED IS THAT IN THE PAST, SALES TAX COULD GROW BY, YOU KNOW, 5%.
AND I THINK, LIKE YOU MENTIONED, YOU'RE GONNA SEE IN HIS, UM, PRESENTATION LATER THAT SALES TAX GROWTH IS, IS VOLATILE.
SOME YEARS IT'S DOWN, SOME YEARS IT'S UP.
UM, WHEN YOU LOOK AT OVER THE PERIOD SINCE 2007, WHAT THE SALES TAX GROWTH HAS BEEN, UM, A LOT OF THAT, UM, GROWTH WHERE HE MENTIONED THE 5% AVERAGE IS A LOT OF THE, YOU KNOW, COMING OUT OF COVID, THAT HUGE, UH, KIND OF POST COVID JUMP IN SALES TAX THAT WE HAD.
UM, AND SO WHEN YOU, UM, REMOVE THAT KIND OF POST COVID RECOVERY YEAR AND LOOK AT THE REST OF THE YEAR SINCE 2007 TO NOW, IT IS MORE IN THE RANGE OF A TWO TO 3% AVERAGE ANNUAL GROWTH.
UM, AND SO THAT'S HOW WE LANDED ON THIS.
UM, YOU KNOW, THESE ASSUMPTIONS AND WHAT I MENTIONED ABOUT THE DISCOUNT RATE IS THAT, YOU KNOW, WHEN YOU'RE CALCULATING WHAT THE PRESENT VALUE OF AN AGREEMENT IS, THE MONEY, THE DOLLAR VALUE TODAY, THE DOLLAR'S GONNA BE WORTH A DIFFERENT AMOUNT LATER.
SO IT KIND OF TAKES INTO ACCOUNT WHAT ARE, UM, THE DISCOUNT RATE OF 3% THAT WE USE ON OUR ANALYSIS IS BASED ON THE AVERAGE INTEREST RATE THAT OUR INVESTMENT POOL EARNS.
SO BASICALLY IT'S KIND OF, YOU KNOW, BRINGING FORWARD WHAT THE VALUE OF THAT FUTURE, OF WHAT THOSE FUTURE PAYMENTS WOULD BE TO COME TO AN AMOUNT IN TERMS OF TODAY'S DOLLARS.
SO THAT'S, THAT'S WHAT YOU'VE USED TO AGREE TO THIS SCHEDULE HERE? YES.
STAFF FROM COUNCIL MEMBER SALINAS'S OFFICE, THANK CHAIR, UH, DIRECTOR, YOU HAD MENTIONED THAT, UH, FINANCE IS PROJECTING 132.6 MILLION IN FUTURE CONTRIBUTIONS, SO CALCULATED OUT TO 51 MILLION IN TODAY'S PRESENT VALUE.
UM, THAT 51 MILLION EXCLUDES THE 22.6 CURRENTLY IN THE BANK, IS THAT CORRECT? SO IS THAT INCLUSIVE OF THAT? UM, WELL, THE 22 MILLION THAT'S IN THE BANK IS FROM PREVIOUS YEAR'S CALCULATIONS THAT WE GOT.
BUT AGAIN, IT'S, IT'S RESTRICTED AND, YOU KNOW, IT'S NOT, IT'S NOT FUNGIBLE.
WE CAN'T JUST USE IT FOR GENERAL FUND GAP CLOSING, IN OTHER WORDS.
BUT WE COULD USE IT FOR INFRASTRUCTURE PROJECTS THAT SPAN THE COUNCIL DISTRICTS IF WE HAD PROJECTS THAT, THAT WERE PURSUANT TO THE AGREEMENT USUALLY ON EXHIBIT B AND HAD MATCHING FUNDS FOR IT.
AND HAS, HAS THERE BEEN ANY ATTEMPT, I, I THINK THIS HAS KIND OF BEEN ALLUDED TO, BUT HAS THERE BEEN AN ATTEMPT TO IDENTIFY ANY POTENTIAL PROJECTS TO PROPOSE? NOT THAT I'M AWARE OF IN THE LAST COUPLE YEARS.
THE, THE LAST TIME THAT I'M AWARE THAT WE SENT REQUESTS TO THEM WAS BACK IN, UM, 2020.
THANK YOU FOR YOUR PRESENTATION.
UM, I'M LOOKING AT THESE PROJECTS, UH, IN FRONT OF ME MM-HMM
NOW THE, THE FUNDS HAVE TO BE USED FOR A MUTUAL PURPOSE OR A MUTUAL AGREED UPON PURPOSE.
AND I'M, I'M SEEING THINGS HERE LIKE ALAMEDA PAVING, HERMAN PARK CLUBHOUSE.
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WHAT, WHAT DID THESE HAVE TO DO WITH, WITH THE WOODLANDS? I WASN'T HERE IN 2007.MY UNDERSTANDING, BASED ON WHAT I'VE HEARD MANY, MANY YEARS AGO, IS THAT THE PROJECTS ON EXHIBIT B ARE, UM, CONTEMPLATE FOR AREAS THAT RESIDENTS OF THE WOODLANDS MAY COME INTO HOUSTON AND USE, THEY MAY WORK IN THE MEDICAL CENTER.
AND SO THAT'S WHERE YOU SEE LIKE THE NORTH MCGREGOR OR, UM, HERMAN PARK OR, UM, YOU KNOW, EVEN MUSEUM DISTRICT, THAT THEY ARE COMING, YOU KNOW, INTO THE CITY MAYBE TO GO TO THE MUSEUM.
THEY'RE COMING INTO THE CITY TO, THEY WORK AT THE MEDICAL CENTER OR USE THE MEDICAL CENTER AS PATIENTS.
UM, AND THEN IN TERMS OF LIKE LAKE HOUSTON PARK AND THE LAKE HOUSTON WILDERNESS PARK LODGES, THAT'S A, YOU KNOW, CLOSER IN THE VICINITY OF THE WOODLANDS.
SO IT, IT'S PRETTY OPEN ENDED THEN IT'S SUBJECTIVE ON, AS LONG AS BOTH PARTIES AGREE ON THE USE OF THE FUNDS, THEN THEY CAN BE ALLOCATED FOR A PROJECT.
IT DOESN'T HAVE TO BE ANYTHING THAT IS, 'CAUSE I MEAN, PEOPLE FROM THE WOODLANDS CAN, CAN DRIVE ON ANY STREET IN HOUSTON OR DO GO TO ANY PLACE.
UM, AND I'M JUST LOOKING AT THIS, UH, CHART HERE.
THESE ARE A LOT OF RANDOM PROJECTS.
I WAS THINKING BEFORE I SAW THIS CHART THAT THINGS WERE GONNA BE VERY MUCH CLOSELY RELATED TO INFRASTRUCTURE PROJECTS OR, YOU KNOW, A TRANSPORTATION PROJECT THAT IS DIRECTLY CONNECTED TO THE WOODLANDS MM-HMM
BUT WHEN I SEE THE HERMAN PARK CLUBHOUSE, THAT'S LIKE AN AMENITY.
SO, UH, THIS GIVES ME A, I GUESS, A MORE CLEAR UNDERSTANDING OF HOW THE FUNDS CAN ACTUALLY BE USED IN A VERY BROAD MANNER AS LONG AS BOTH PARTIES AGREE.
AND I WOULD ENCOURAGE YOU TO LOOK AT THE, I THINK JOSH GAVE, UM, COPIES OF THE EXHIBIT B, UM, THAT SPEAKS TO, AND NOW THAT I'M LOOKING AT IT DOES SPEAK TO, YOU KNOW, MENTIONING THE EASTERN EDGE OF THE MEDICAL CENTER.
UM, AND I THINK IT WOULD'VE BEEN HELPFUL IF WE WOULD'VE PUT THE, UM, TOTAL DISBURSEMENTS, THE COST OF THE PROJECTS ON THERE SO PEOPLE COULD ACTUALLY SEE, OKAY, YEAH.
WE HAVE A SEPARATE HANDOUT THAT WE CAN RECIRCULATE.
YEAH, THAT WOULD'VE BEEN HELPFUL, BECAUSE I KNOW, UM, FOR THE PROJECTS THAT ARE IN THE MEDICAL CENTER, THE MAJORITY OF THE FUNDS, IT LOOKS LIKE, YOU KNOW, GREENBRIER STREET, THERE WAS 3.4 MILLION CAMBRIDGE PAVING, WHICH IS IN KK 1.2 MILLION.
UM, THE ALAMEDA PAVING AND K 1.4 MILLION, ALL OF THOSE LEAD TO, UM, THE MEDICAL CENTER AND DISTRICT C.
AND IT LOOKS LIKE D THE ALE NEIGHBORHOOD CENTER WAS ONLY 22,000, UM, BEFORE, RIGHT? YEAH, THIS WAS BEFORE.
UM, SO I THINK THE, THE ACTUAL COST WOULD'VE BEEN HELPFUL FOR THAT CONVERSATION AS WELL.
BUT IT, IT DOES SEEM LIKE WE HAVE SOME LATITUDE IN, IN THE PROJECTS.
BUT, UM, MY QUESTION IS WHO, WHO IS ACTUALLY THE RESPONSIBLE PARTY FOR SUBMITTING THE PROJECTS? I'D HAVE TO GO BACK AND LOOK AT THE AGREEMENT.
I KNOW THAT THE REQUESTS CAME IN THE PAST ORIGINATED FROM EITHER THE PARKS DEPARTMENT OR THE HOUSTON PUBLIC WORKS DEPARTMENT, UM, BASED ON THE PROJECTS THAT ARE ON HERE, I THINK THEY WERE ALL FOR THOSE TWO DEPARTMENTS.
UM, I'LL HAVE TO GO BACK AND LOOK AT THE AGREEMENT ITSELF TO SEE IF IT, IF IT CALLS OUT A SPECIFIC DEPARTMENT.
BECAUSE I MEAN, AS, AS A DISTRICT COUNCIL MEMBER, I SEE THIS AS A, AS A, OF COURSE, AN ADDITIONAL OPPORTUNITY FOR US TO HAVE INFRASTRUCTURE PROJECTS, ESPECIALLY WITH COUNCIL DISTRICT SERVICE FUNDS AS POTENTIAL MATCHING DOLLARS.
SO I WANNA BE CLEAR WITH WHO IS ACTUALLY RESPONSIBLE FOR SUGGESTING THE PROJECTS TO GET IN THE QUEUE FOR APPROVAL.
SO, AND I THINK THAT, UH, YOU KNOW, ONE THING I WANNA REEMPHASIZE IS THAT THE, YOU KNOW, THE, THE FUNDS THAT ARE IN THIS ACCOUNT RIGHT NOW, YOU KNOW, THEY'VE BEEN SITTING THERE UNUSED FOR, LIKE WE MENTIONED, SIX YEARS SINCE THE LAST PROJECT.
UM, WITH THIS AGREEMENT, WE'LL BE ABLE TO FREE UP THE FUNDING AND USE IT MORE.
LIKE I MENTIONED, WE, WE KNOW WHAT THE GENERAL FUND OUTLOOK LOOKS LIKE, RIGHT.
WE HAVE THE FIVE-YEAR FORECAST.
SO, UM, YOU KNOW, IT'S GONNA REALLY ALLOW US TO BRING THAT FUNDING INTO THE, INTO THE GENERAL FUND, IS THE IDEA OF THE THIRD AMENDMENT.
SO CAN WE FIND OUT WHO WOULD ACTUALLY BE THE PERSON RESPONSIBLE FOR SUGGESTING THE PRO WHO'S HAVING THE COMMUNICATION WITH THE WOODLANDS? IS WHAT I WANT TO KNOW TODAY.
I MEAN, FOR THE LAST SIX YEARS, AS FAR AS I KNOW, NO PROJECTS HAVE BEEN REQUESTED.
RIGHT? SO WE'D HAVE TO GO BACK AND LOOK, YOU KNOW, BACK
[00:30:01]
IN 2020 WHO WILL HAVE JURISDICTION OVER THIS PROJECT AS WE MOVE FORWARD.WELL, IF WE MOVE FORWARD WITH THE THIRD AMENDMENT, THE FUNDING IS GOING TO BE GENERAL FUND REVENUE, AND IT'S GONNA GO INTO THE FUND BALANCE FOR THE GENERAL FUND.
SOMEBODY STILL IS GONNA BE RESPONSIBLE FOR MAKING THE SUGGESTION FOR THE PROJECTS.
NO, THE AGREEMENT IS THAT IT WILL GO INTO GENERAL FUND REVENUE TO HELP CLOSE THE GAP, IS OUR INTENTION.
SO SOMEBODY STILL IS GOING TO BE RESPONSIBLE FOR MAKING THE DECISION ON THE PROJECT.
YOU'RE, YOU'RE WELCOME TO DO POINT OF ORDER IF YOU'D LIKE.
UM, BUT BASICALLY I THINK WHAT'S BEING SAID IS THIS, THIS AGREEMENT WILL BE, IT WON'T BE FOR MUTUALLY AGREED UPON PROJECTS.
IT WILL BE 50 PLUS MILLION STRAIGHT INTO THE GENERAL FUND.
HE'D BE USED ON MONEY RESTRICTED.
SO THEN WE JUST JUST GO INTO THE GENERAL FUND.
AND WE DON'T HAVE TO DO, SO NO ONE WILL NOW TO BE RESPONSIBLE, WE TO AGREE WITH RESPONSIBLE.
SO IT TAKES THAT WHOLE, UM, PROCESS OUT.
AND WE JUST GET THE ADDITIONAL DOLLARS.
I THINK THERE'S JUST SOME, SOME, YOU KNOW, SOME, AND THAT'S WHY I WAS ASKING WILL JONES AND YOU, YOU KNOW, I THINK THERE'S SOME QUESTION ABOUT LIKE, THIS 22 MILLION THAT'S BEEN THERE, YOU KNOW, COULD WE HAVE TAPPED INTO THAT FOR VARIOUS PROJECTS? UM, AND, AND, AND THERE'S JUST, I THINK PEOPLE AROUND THE HORSE, YOU MIGHT WANNA KNOW A LITTLE BIT MORE ABOUT THAT.
THANK YOU MADAM CHAIR AND THANK YOU DIRECTOR.
UM, APPRECIATE ALL THE QUESTIONS IN THE DISCUSSION.
UM, TWO IMPORTANT LIMITATIONS I THINK HERE ARE THAT WHATEVER PROJECTS THE CITY WOULD LIKE TO WORK ON, THE WOODLANDS WOULD HAVE TO AGREE, UH, TO, TO PURSUE THOSE PROJECTS, NUMBER ONE.
AND NUMBER TWO, UM, THE CITY WOULD HAVE TO MATCH WHATEVER MONEY WAS PULLED OUT OF THE FUND.
SO, UM, THOSE ARE LIMITATIONS ON, ON WHAT IS CURRENTLY $22 MILLION IN THE FUND.
UM, I'M WONDERING, AND I DON'T KNOW IF YOU CAN ANSWER THIS OR NOT, BUT LET'S SAY WE GET TO THE END OF THE AGREEMENT, WHICH IS 2057, I THINK, AND THERE'S MONEY IN THE, IN THE FUND, AND, UH, THE PARTIES HAVEN'T BEEN ABLE TO AGREE ON A PROJECT TO SPEND THE MONEY ON.
AND SO THE, THE AGREEMENT I PRESUME WOULD TERMINATE AT THAT TIME.
WHAT WOULD HAVE HAPPENED TO THE MONEY LEFT IN THE FUND? THAT IS A GOOD QUESTION.
I THINK I'M GONNA HAVE TO WORK WITH LEGAL ON LOOKING AT THE AGREEMENT TO SEE IF IT CONTEMPLATES WHAT WOULD HAPPEN IN THAT CASE.
ALRIGHT, SO, SO THE CHOICES ARE CONTINUE ON THE PATH WE'RE GOING ON, AND IT'S BEEN SEVERAL YEARS SINCE THE CITY AND THE WOODLANDS WERE ABLE TO AGREE ON A PROJECT TO FUND OR TO, UM, TAKE THE MONEY, UH, 22 MILLION, UH, THE FIRST YEAR, AND THEN 9 MILLION APPROXIMATELY EVERY YEAR AFTER THAT.
THE CITY COULD USE IT FOR WHATEVER IT WANTED.
UM, I WANTED TO GO BACK TO, UM, MATCHING FUNDS FROM THE CIP POTENTIALLY DID.
COULD WE GET CLARIFICATION? ARE WE ABLE TO, UM, FIND PROJECTS WITHIN THE CIP THAT ARE APPROVED BY THE WOODLANDS AND THEN ABLE TO PULL MONEY FROM THE WOODLANDS ACCOUNT TO KIND OF PUSH? BECAUSE I UNDERSTAND THAT THE, THE ISSUE IS, UM, A LOT OF TIMES THE CITY DOESN'T HAVE THE MONEY TO PROVIDE THE MATCHING GRANT TO ACTUALLY BUILD THE PROJECT.
ARE WE ABLE TO PULL FROM THE CIP ALREADY AN INFRASTRUCTURE FUND TO THEN MATCH WITH THE WOODLANDS FUNDS? IN THE PAST WE'VE USED CIP FUNDINGS AS MATCHES.
THE REASON I ASK THIS, BECAUSE IT FEELS LIKE WE'RE LEAVING INFRASTRUCTURE DOLLARS ON THE TABLE HERE BECAUSE WE'RE GETTING A 50% DISCOUNT.
OBVIOUSLY WE HAVE TO COME TO AN AGREEMENT WITH THE WOODLANDS ON THE RIGHT PROJECT, BUT WE'RE ABLE TO PULL FROM THE CIP ALREADY AN INFRASTRUCTURE FUND AND THEN GET A 50% DISCOUNT USING WOODLANDS DOLLARS.
DIRECTOR, WERE YOU INVOLVED IN NEGOTIATING THIS, THIS PROPOSAL WITH THE WOODLANDS? DO YOU THINK IT'S THE BEST DEAL WE COULD HAVE POSSIBLY GOTTEN? UM, AND AND DO YOU THINK IT IMPROVES OUR FINANCIAL POSITION AS A CITY? YES.
I MEAN, I THINK THAT WE, THERE'S A LOT OF DIFFERENT SCENARIOS.
THERE'S A LOT OF DIFFERENT ASSUMPTIONS THAT YOU COULD USE IN THE CALCULATION.
UM, WE RAN DIFFERENT SCENARIOS.
OF COURSE, WE HAD A LOT OF ROBUST BACK AND FORTH WITH THE TOWNSHIP.
UM, AND THIS IS THE BEST DEAL THAT WE COULD, WE COULD GET FROM THEM.
UM, AND I THINK TO ANSWER THE SECOND PART OF YOUR QUESTION, YES, IT'S DEFINITELY GONNA PUT US IN A BETTER FINANCIAL POSITION.
YOU KNOW, WE, UM, WE KNOW, I CERTAINLY LIKED HEARING THAT $3 MILLION GAP THAT COUNCIL MEMBER CASTILLO BROUGHT UP.
YOU KNOW, AND IT SALES TAX FORMS, I DON'T THINK WE'VE EVER HAD A $3 MILLION GAP AS LONG AS I'VE BEEN SITTING IN THE CITY.
SO DEFINITELY WE, UM, AND WE KNOW WHAT THE FIVE YEAR
[00:35:01]
FORECAST LOOKS LIKE, RIGHT? WE KNOW THAT THE WORK WITH THIS FISCAL YEAR 27 BUDGET WASN'T DONE.WE GOT THE UPGRADE FROM MOODY'S AND THAT'S GREAT NEWS.
BUT WE KNOW THAT WE HAVE, YOU KNOW, WE HAVE TO START FOCUSING ALREADY NOW ON WHAT IS 28TH BUDGET GONNA LOOK LIKE IN 29 IN THE NEXT FIVE YEARS.
SO, WELL, YOU'VE BEEN CHARGED WITH FINDING ADDITIONAL REVENUE SOURCES AND THIS IS, UM, A REVENUE SOURCE.
UM, IT'S STRAIGHT TO OUR GENERAL FUND.
UM, THANK YOU VERY MUCH, COLLEAGUES.
UM, IF YOU DON'T HAVE ANY MORE QUESTIONS ON THIS, ANY PUBLIC SPEAKERS ON THE, UH, THE WOODLANDS AGREEMENT? YES, SIR.
JUST GIVE US YOUR NAME AND DO YOU HAVE THREE MINUTES? ALRIGHT, I'M BRAD BAILEY.
I'M CHAIRMAN OF THE WOODLANDS TOWNSHIP.
UM, BEEN VERY INVOLVED IN THIS WHOLE PROCESS.
I JUST WANTED TO KIND OF HIGHLIGHT A FEW THINGS THAT WE TALKED ABOUT TODAY.
UM, THE MAYOR WAS LOOKING FOR OPPORTUNITIES TO FIND ADDITIONAL REVENUES, HOW THIS WHOLE PROJECT, PROJECT STARTED.
UM, I BROUGHT UP THE IDEA BECAUSE WE HAVE $26.2 MILLION AT THE END OF THE YEAR SITTING IN AN ACCOUNT THAT WE HAVE HAD ZERO REQUESTS ON SINCE 2018 ZERO.
IT'S NOT LIKE THE WOODLANDS IS BEING A, A BAD NEIGHBOR SAYING ABSOLUTELY.
WE'VE HAD NOTHING PRESENTED TO US SINCE THE HERMAN PARK CLUBHOUSE AT THE GOLF COURSE.
I THINK OUR CHART SAYS 2020, BUT I THINK THAT'S JUST WHEN THE RES WHEN THE, WHEN IT WAS COMPLETED.
YEAH, BUT 2018 WAS THE LAST ONE.
SO, UM, THIS IS A TRUE WIN-WIN SITUATION FOR US.
UM, THE TOWNSHIP IDENTIFIED THAT THERE WAS, UH, LIKE I SAID, $22.6 MILLION AT THE END OF THE YEAR IN THE REGIONAL PARTICIPATION FUND.
THOSE FUNDS RESTRICTED FOR USE ONLY TO CERTAIN IDENTIFIED PROJECTS IN EXHIBIT B THAT YOU, THAT YOU SEE THAT WAS GIVING, UM, AND CERTAIN CAPITAL IMPROVEMENT PROJECTS.
NONE OF THE IDENTIFIED PROJECTS HAVE BEEN UNDERTAKEN SINCE 2018, AND THERE WERE NO PROJECTS ON THE LIST THAT WERE IDENTIFIED IN THE NEAR TERM PRIORITY FOR EITHER PARTIES, UH, THAT LED THE CITY AND THE TOWNSHIP TO COLLABORATE ON HOW TO RESTRUCTURE THE RPA AGREEMENT TO MEET THE CITY'S CURRENT DEEDS AND THE TOWNSHIP'S LONGER RANGE GOALS TO SEEK A WIN-WIN SCENARIO.
BOTH THE INTENT OF THE EFFECT, BOTH THE INTENT AND THE EFFECT OF THE THIRD, THIRD AGREEMENT TO THE RPA IS TO REMOVE RESTRICTIONS ON THE CITY TO USE THE $22.6 MILLION CURRENTLY IN THE REGIONAL PARTICIPATION FUND THAT ARE TOWNSHIP SALES TAXES THAT WE PUT INTO THIS FUND FOR SUCH CITY USE OF THOSE FUNDS GET THE HIGHEST PRIORITY NEEDS WITHOUT THE NECESSARY OF THE CITY, UH, EXPENDING THEIR OWN MATCHING DOLLARS ON THESE PROJECTS.
ADDITIONALLY, THE THIRD AMENDMENT, THE AMENDMENT PROVIDES THE TOWNSHIP, UH, IN THE CITY AN ADDITIONAL $27 MILLION IN UNRESTRICTED FUNDS TO THE CITY'S PRIORITIES OVER THE NEXT THREE YEARS.
THIS $27 MILLION AMOUNTS TO THE PROJECTED AMOUNTS THAT WOULD BE DEPOSITED BY THE TOWNSHIP WITH THEIR SALES TAXES INTO THE REGIONAL PARTICIPATION FUND FOR THE NEXT 10 YEARS.
SO 10 YEARS UPFRONT THAT WE'RE PAYING OVER THE NEXT THREE.
SO THE RELEASE OF THOSE FUNDS OVER THE THREE PERIODS REPRESENTS A SIGNIFICANT ACCELERATION AND ADDITIONAL DOLLARS IN THE HANDS OF THE CITY.
THE NET EFFECT, THE CITY GAINS $50 MILLION UNRESTRICTED FUNDS IN THE NEAR TERM FOR THE DEPLOYMENT OF THE CITY IN THE AREAS THE GREATEST NEEDS WITHOUT REQUIREMENT OF THE, OF THE CITY TO CONTRIBUTE A SINGLE MATCHING DOLLAR.
AND IN AN EXCHANGE, THE TOWNSHIP IS RECEIVING A LONG TERM BENEFIT IN ACHIEVING THE END DATE OF THE REQUIREMENT OF THIS ONE 16TH OF A PENNY, UM, IN THE SALES TAX COLLECTED IN THE PRIORITY OF WOODLANDS THAT LIES WITHIN THE CITY'S ETJ DEPOSIT INTO THE REGIONAL PARTICIPATION FUND.
AS I SAID, WIN-WIN, UH, PROJECT SHORT TERM AND LONG TERM.
SO, UH, BE HAPPY TO ANSWER ANY QUESTIONS.
WE HAVE SOME COUNCIL MEMBER FLICKINGER.
APPRECIATE YOU COMING DOWN HERE.
UM, YOU KNOW, WE LOOKED AT THE LIST OF PROJECTS AND I THINK EVERYBODY WAS KIND OF SURPRISED GIVEN THAT IT WAS SUPPOSED TO BE MUTUAL BETWEEN THE WOODLANDS AND AND HOUSTON.
BUT WHAT EXACTLY WAS THE CRITERIA THAT Y'ALL WERE LOOKING AT IN APPROVING THE PROJECTS THAT Y'ALL HAD DONE IN THE PAST? WELL, IN, IN EXHIBIT B, UM, I THINK THAT, THAT THEY'VE HANDED OUT HERE, WE, WE GO THROUGH, UM, THE DIFFERENT ONES.
EVERYONE FROM LAKE LAKE, HOUSTON STATE PARK, TO MCGREGOR PARK, TO MEMORIAL PARK, TO HERMAN PARK, TO HERMAN BROWN PARK, UM, IMPROVEMENTS TO THE ENTRANCE AND EXITS OF TEXAS MEDICAL CENTER.
UM, BUT ALL THE ONES LAID OUT IN EXHIBIT B WERE, WAS THE PRIORITY.
THAT'S THE GOAL OF THE REGIONAL PARTICIPATION FUND.
AND WE'VE HAD ZERO SINCE, YOU KNOW, 2018 AS EVEN LIKE, HEY, WOULD YOU CONSIDER FUNDING THIS? BUT IN IT SEEMED LIKE A BIT OF A STRETCH.
SO TO YOUR POINT, I DON'T THINK THE WOODLANDS HAS BEEN A BAD NEIGHBOR.
I MEAN, I AGREEING TO THE STUFF YOU'VE ALREADY AGREED TO, SO APPRECIATE THAT.
AND IT SEEMS TO ME LIKE ESSENTIALLY WHAT THE, THE MAYOR HAS DONE IS, IS TRADED A BIRD IN THE HAND FOR TWO IN THE BUSH.
UH, YOU KNOW, AND I THINK THERE'S, THERE'S NOTHING TO SAY THAT IN THE FUTURE THE WOODLANDS WOULD NECESSARILY HAVE TO AGREE TO SOME OF THESE PROJECTS, LIKE STUFF IN THE MEDICAL CENTER.
IF THERE WE'RE ABLE TO DO THIS.
YEAH, THERE'S, THERE'S, IT'S UNRESTRICTED AND YOU DON'T NEED TO COME ASK US, CAN WE DO THIS PROJECT OR CAN WE DO THIS PROJECT? OKAY.
WE BELIEVE IN, IN A LOT OF THE DIFFERENT THINGS, ECONOMIC DEVELOPMENT, TRANSPORTATION, UH, TRAFFIC, YOU KNOW, ALL THE DIFFERENT THINGS.
[00:40:01]
BUT, UM, THIS JUST IS THE OUTSIDE THE BOX WAY OF LOOKING AT HOW WE CAN HELP THE, THE CITY IN THE SHORT TERM AND ALSO BENEFIT TO BE ABLE TO KEEP OUR SALES TAXES FOR SOME OF THE NEEDS THAT WE HAVE, UH, IN THE LONG TERM.I MEAN, WE'RE LOOKING UNDER THE COUCH CUSHIONS.
WE FOUND SOME, UM, COUNCIL MEMBER PANZA.
UM, YOU MENTIONED THERE'S BEEN ZERO REQUESTS SINCE 2018.
UM, UM, MAYOR PROTO CA TATUM'S QUESTION, WHO GENERALLY WAS THE COUNTERPART AT THE CITY TO PROPOSE THOSE QUESTIONS OR PROPOSE THOSE, UM, THOSE PROJECTS? UM, I SEE SOME OF THESE PROJECTS FROM DISTRICT C, I'D LOVE TO BE ABLE TO PULL FROM THIS $26 MILLION THAT'S CURRENTLY IN THE INFRASTRUCTURE KIND OF FUND.
COULD YOU JUST WALK US THROUGH A LITTLE BIT, WHO WAS YOUR, YOUR COUNTERPART WHO PROPOSED THOSE PROJECTS? WHY HAVEN'T PROJECTS BEEN PROPOSED? I'M, I'M NOT TRYING TO DODGE, THIS IS MY FOURTH YEAR, FINAL YEAR AS CHAIRMAN OF THE WOODLANDS TOWNSHIP.
AND, UH, LIKE I SAID, NOTHING HAS BEEN PRESENTED MY ENTIRE TERM.
I DON'T KNOW, I DON'T KNOW THE, WHO THEY CALLED ON STAFF OR HOW IT WAS, I JUST KNOW FOR A FACT THAT THERE'S NOTHING BEEN DONE SINCE 2018.
UM, AND IN DOING THAT, THAT'S WHAT THE FRUSTRATION THAT WE HAD WAS HERE'S ALL THIS MONEY THAT'S GOING AND, AND GOING UP AND UP AND UP, AND YET NO ONE HAS BEEN ABLE TO KIND OF TAP IT FOR A GOOD USE.
AND, AND WHEN I REACHED OUT TO THE MAYOR, UM, THIS WAS, AS THE CHAIRWOMAN SAID, LOOKING UNDER, UH, CUSHIONS.
IT'S A PRETTY BIG CUSHION WITH $50 MILLION UNDERNEATH IT.
BUT YEAH, WE WERE LOOKING UNDER CUSHIONS.
UM, AND THAT, AND, AND, AND IDENTIFYING THIS AS A, AS A NEED IS, IS A WIN-WIN, I THINK FOR THE CITY IN THE SHORT TERM TO, TO REALLY KIND OF HELP, YOU KNOW, SHORE UP YOUR GENERAL FUND.
BUT I, I WILL FIND OUT THE PROCESS OF WHO TOUCHED WHAT, AND I'LL GET BACK TO YOU ON THAT.
CHAIR, THANK YOU FOR COMING FORWARD.
UH, WHAT, WHAT WOULD BE YOUR MATH, I KNOW OUR MATH SAID AT, AT THE END OF THIS AGREEMENT IN 2057 THAT WE WOULD BE AT 132 MILLION ESTIMATED.
WHAT, WHAT WOULD YOUR MATH BE? UM, I THINK THE $132 MILLION IS, IS, IS CORRECT, UM, THROUGH 2057.
IS THAT YOUR QUESTION? I DON'T HAVE ALL THAT IN FRONT OF ME.
AND I'M, I'M NOT THE, I'M NOT THE FINANCE GUY.
SO YOU ALLALL DIDN'T DISCUSSED THAT AT YOUR MEETING WHEN DECIDING IF HOW MUCH MONEY, UH, YOU ALL WOULD OWE FOR THE REMAIN.
I THINK $132.6 MILLION IS, IS THE ROUND ROUTE NUMBER THAT I REMEMBER TALKING ABOUT.
SO LOOKING AT, LOOKING AT, BUT WE'RE, WE'RE PAYING A LOT OF IT UP UPFRONT.
UH, 10 YEARS OF EQUIVALENT SALES TAXES IS WHAT WE'RE GONNA TRY TO PAY UP FRONT.
WE'RE GONNA, ARE WE GONNA GET, UH, BENEFIT IN THE LONG RUN? ABSOLUTELY.
IT'S A WIN-WIN FOR BOTH OF US AT, IN THE END, WHAT'S THE BENEFIT FOR US IN THE END, THE LONG TERM, $50 MILLION UPFRONT? I SAY THE, THE LONG TERM.
OH, WELL, UM, IT'S A, IT'S A, IT'S A SHORT TERM WIN AND, AND ANNEXATION IS NOT SOMETHING THAT'S REALLY EVEN HAPPENING ANYMORE.
UNDERSTAND, I MEAN, THE STATE LAW UNDERSTAND HAS CHANGED THAT UNDERSTAND.
SO THAT, AND THAT'S ANOTHER THING.
I THINK A LOT OF THIS HAS GOTTEN THE ATTENTION OF THE ANNEXATION PORTION.
THIS IS NOT AN THAT, THAT, THAT'S LIKE ONE LITTLE BITTY PARAGRAPH IN THE ENTIRE AGREEMENT.
THE BIG TAR DEAL IS, IS THE SALES TAX OPPORTUNITY THAT WE HAVE.
UH, BUT JUST LIKE YOU, YOUR, YOUR, UM, YOUR, YOUR FINANCE AND YOUR CONTROLLER SAID YOU'RE LOOKING AT SALES TAXES OR VOLATILE REVENUE SOURCE.
YOU CAN'T COUNT ON IF COVID COULD HIT AGAIN OR SOMETHING LIKE THAT, COULD HIT AGAIN AND, AND, AND, AND RE YOU KNOW, DIFFERENT THINGS.
YOU'RE GONNA HAVE A PRESENTATION HERE AND MOMENTARILY ABOUT A VOLATILE SALES TAX, UH, AND COUNTING ON THAT.
SO, UM, DO YOU KNOW WHAT WOULD HAPPEN AT THE END OF THE AGREEMENT? LET'S SAY WE, WE DIDN'T GO FORWARD WITH THIS AND AS COUNCIL MEMBER RAMIREZ SAID, AT THE END OF 2057, WHAT, WHAT, WHAT WOULD HAPPEN TO THAT MONEY IF IT ADDED UP TO JUST A HUNDRED AND LET'S SAY IT WAS 132 MILLION SITTING THERE AT THE END OF THE TERM.
DO YOU KNOW WHAT WOULD HAPPEN TO THAT MONEY? I, I BELIEVE WE'D HAVE TO DO THE AGREEMENT OF, OF WHAT PROJECTS TO FUND AND WHAT NOT PROJECTS TO GOING THROUGH THIS, THIS SIMPLE COURSE OF ACTION THAT'S LAID OUT IN THE CONTRACT.
I'M, I'VE ASKED OUR ATTORNEY TO GET BACK TO ME.
THEY HAVEN'T GOTTEN BACK TO ME JUST YET, BUT I'LL FIND OUT.
THANK YOU, MADAM CHAIR, AND THANK YOU FOR TAKING THESE QUESTIONS.
UH, MR. BAILEY, THANK YOU FOR COMING BACK THIS WEEK.
UM, SO YEAH, IF, IF YOU COULD GET AN ANSWER TO US ON WHAT WOULD HAPPEN TO THE MONEY AT THE END OF THE AGREEMENT IF IT WAS NOT SPENT, THAT'D BE GREAT.
SO, UM, THIS, THE MONEY IN THIS FUND REPRESENTS SALES TAXES COLLECTED THROUGHOUT THE WOODLANDS TOWNSHIP.
IS THAT RIGHT? ONE 16TH OF IT? ONE 16TH.
IT'S NOT THE ENTIRE TOWNSHIP, IT'S, IT'S A LOT OF OUR COMMERCIAL DISTRICTS.
THE ANNEXATION IS A PRETTY INTERESTING DEAL THE WAY THEY, THEY LOOKED AT ALL THAT AREA.
UM, SO IT'S NOT THE ENTIRE TOWNSHIP, BUT IT IS A LARGE PORTION OF OUR COMMERCIAL DISTRICTS.
CO I DO HAVE AN ANSWER FOR YOU, IF YOU DON'T MIND.
UM, UH, THE MONEY WOULD CONTINUE TO RESIDE WITHIN THE FUND.
THE PROPOSED, UH, THIRD AMENDMENT WOULD ONLY, UH, DOCUMENT THAT SUGGESTS TO END DATE OF THE FUND.
SO NOT A, DOESN'T SOUND LIKE A CLEAR CUT ANSWER TO ME IF, IF THE PARTIES WEREN'T ABLE TO AGREE, WELL, IT'S FROM A
[00:45:01]
LAWYER, SOALRIGHT, SO, SO, SO PART OF HOUSTON'S ETJ CURRENTLY, UM, IS IS ADJACENT TO THE WOODLANDS, IS THAT RIGHT? IT'S SOME OF IT OVERLAPS OVERLAP WITHIN THE WOODLANDS TOWNSHIP? YES, SIR.
AND, AND THE AREA FROM WHICH THE SALES TAX COLLECTED, OR ONE 16TH OF IT INCLUDES THAT ETJ, IS THAT RIGHT? YES, SIR.
SO ABSENT THIS RPA THAT WAS SIGNED BACK IN 2007, UM, WOULD THE CITY HAVE ANY CLAIM TO THIS, ANY SALES TAX REVENUE FROM THAT AREA? UM, I BELIEVE THERE'S LEGISLATION WHEN THE TOWN CENTER IMPROVEMENT DISTRICT WAS SET UP, UM, THAT CHANGE, THAT, THAT FORMULA OF WHAT THAT WAS, BUT I BELIEVE THERE WAS SOME IN THERE AS FAR AS FOR THE CITY OF HOUSTON, CORRECT? MM-HMM.
BUT YOU DON'T KNOW, I DON'T KNOW MUCH YOU WERE, I KNOW FOR SURE, LIKE I SAID, I APOLOGIZE.
I CAN GET BACK TO YOU ON THOSE ANSWERS THOUGH, FOR SURE.
THANK YOU SO MUCH MR. BAILEY, THANK YOU SO MUCH FOR COMING TODAY AND, UH, IF ANY, ANY OUTSTANDING QUESTIONS, IF YOU WANNA JUST FORWARD 'EM TO OUR OFFICE AND WE'LL MAKE SURE ABSOLUTELY.
EVERYBODY, EVERYBODY GETS 'EM.
UM, THANK YOU VERY MUCH FOR YOUR WORK.
ANY FOLLOW UP QUESTIONS? I'LL, I'LL BE HANGING AROUND AFTERWARDS.
WE APPRECIATE YOUR BEING HERE VERY MUCH.
ANY ADDITIONAL PUBLIC SPEAKERS ON THE WOODLANDS AGREEMENT? OKAY, SEEING NONE, WE WILL MOVE ON TO OUR NEXT PRESENTATION, WHICH IS OUR, UM, 4 57 B PROGRAM, OUR DEFERRED COMPENSATION PLAN.
UM, COLLEAGUES THAT PARTICIPATE, UH, PROBABLY NOTICED THAT WE HAVE A DIFFERENT PROVIDER NOW.
UM, AND YOU WOULD'VE GOTTEN AN EMAIL AND YOU WOULD'VE GOTTEN SET UP ON THE NEW FIDELITY IS OUR NEW, UM, OUR NEW PARTNER IN THIS.
SO WE ARE DOING A PRESENTATION ON OUR DEFERRED COMPENSATION PLAN, AND I SEE WE ARE JOINED BY A RASHID AND I WILL, AND ALSO VAN ADAMS WITH FIDELITY INVESTMENTS.
SO GREAT TO HAVE YOU BOTH AND WALK US THROUGH WHAT THIS CHANGE HAS HAPPENED AND HOW OUR 4 57 B PROGRAM WORKS.
I'M A PROUD MEMBER AND PARTICIPANT AND HAVE REALLY DONE THIS.
THIS FUND HAS DONE PRETTY WELL, YOU KNOW, FOR ME THROUGH THE, THROUGH THE YEARS, SO KEEP GROWING IT.
UH, COUNCIL MEMBER, UH, AND THE STAFF.
GOOD MORNING ARE
I KNOW YOU'VE SAID VAN ADAMS, BUT TO START OFF FROM FIDELITY IS DOUG POOR AND THEN VAN WILL BE JOINING SHORTLY.
SO JUST FOR CLARIFICATION, UH, THE PURPOSE OF THIS PRESENTATION IS TO GIVE THIS COMMITTEE AN OVERVIEW OF THE CITY'S 4 57 TRANSITION, UH, 4 57 PLAN THAT WAS TRANSITIONED FROM OUR PREVIOUS, UH, THIRD PARTY ADMINISTRATOR, EMPOWER TO NOW FIDELITY.
UH, WE HAD, UH, DIFFERENT ROLES AND RESPONSE FROM THESE FOR THE CITY, VARIOUS DEPARTMENTS AS WELL AS, UH, THE TWO VENDORS THAT WERE INVOLVED IN THIS PROCESS.
AND I WANNA ALSO TAKE THIS OPPORTUNITY BEFORE I GO FURTHER IN THIS, UH, PRESENTATION TO COMMEND THE F SE, UH, ASSISTANT DIRECTOR ANDA FOR DOING AN EXCELLENT JOB DURING THIS TRANSITION TO TRY TO MAKE SURE THAT THE TRANSITION WAS SUCCESSFUL, ESPECIALLY GIVEN THAT IT'S ABOUT $1.4 BILLION INVOLVED IN THIS, UH, MONEY FOR THE ASSETS FOR THE CITY OF ABOUT 16,000 PLUS EMPLOYEES.
SO WITH THAT, I JUST WANNA GO TO SLIDE UH, TWO, WHICH TALKS ABOUT A LITTLE HISTORY AND BACKGROUND.
UM, EMPOWER HAD SERVED THE CITY'S THIRD PARTY ADMINISTRATOR AND REC RECORD KEEPER PRIOR TO THIS TRANSITION AND THAT THE CONTRACT WAS SET TO EXPIRE IN DECEMBER OF, UH, 2025.
THE CITY WENT THROUGH A COMPETITIVE PROCUREMENT PROCESS TO EVALUATE THE RECORD KEEPING AND ADMINISTRATIVE SERVICES.
FOLLOWING THE COM UH, COMMITTEE'S, EVA EVALUATION COMMITTEE'S RECOMMENDATION, FIDELITY WAS SELECTED AND THIS, UH, THE COUNCIL HAD APPROVED THE CONTRACT FOR THE FIDELITY IN NOVEMBER OF 2025.
AFTER A SUCCESSFUL TRANSITION, FIDELITY HAS ASSUMED RECORD KEEPING FOR, UH, RESPONSIBILITY FOR THE 4 57 PLAN, EFFECTIVE JUNE 1ST, 2026.
THIS IS A SIGNIFICANT PLAN AT THE TIME THAT THIS PRESENTATION WE PUT TOGETHER, BECAUSE THE PARTICIPANTS CHANGED, IT WAS ABOUT 16,250 PARTICIPANTS AS OF THE, THE PROFESSION OF THIS, UH, SLIDES.
THE FIDELITY CONTRACT AS THE COUNCIL APPROVED, IS FOR SEVEN YEARS, FIVE PLUS TWO ONE YEAR RENEWALS, AND, UH, IT STARTED
[00:50:01]
EFFECTIVE IN JUNE 1ST, 2026.THE TRANSITION REQUIRED COORDINATION ACROSS MULTIPLE AREAS OF THE CITY DEPARTMENTS AS WELL AS WITH THE, THE OUTGOING AND THE INCOMING RECORD KEEPERS.
FINANCE SERVED AS THE CENTRAL POINT OF COORDINATION WORKING WITH OUR INTERNAL DEPARTMENTS LIKE HR, A RA PAYROLL, UH, AND, AND HITS MOST SIGNIFICANTLY WHERE WE HAD TO GET THE FILES TRANSFERRED AND RECONCILED.
A SIX SIGNIFICANT PART OF THE WORK INVOLVED, MAKING SURE PARTICIPANT DATA PAYROLL FILES AND SYSTEM INTERFACES WERE PROPERLY TRANSFERRED AND TESTED.
WE ALSO RECOGNIZE THAT PARTICIPANT COMMUNICATION WAS CRITICAL.
FINANCE WORKED WITH HR AND FIDELITY TO MAKE SURE EMPLOYEES HAD INFORMATION AND RESOURCES TO UNDERSTAND THE TRANSITION AND ACCESS THEIR ACCOUNTS.
THE OBJECTIVE THROUGHOUT THIS TRANSITION PROCESS WAS TO PROTECT THE INTEGRITY OF PARTICIPANT DATA, MAINTAIN AND STREAMLINE PAYROLL AND CONTRIBUTION PROCESS, AND PROVIDE CONTINUITY OF SERVICE FOR OUR EMPLOYEES.
ULTIMATELY, THE GOAL AND OF THE TRANSITION IS NOT SIMPLY TO HAVE A NEW RECORD KEEPER, BUT ALSO TO IMPROVE AND PROVIDE BETTER TOOLS FOR THE EMPLOYEES WITH EDUCATION AND SUPPORT, ACCESS TO RESOURCES THAT CAN HELP THEM PREPARE FOR THEIR RETIREMENT.
WITH THAT, I WILL TURN IT OVER TO DOUG AND A FEW, UH, TO START OFF, AND OF COURSE, VAN ADAMS LATER ON WILL JOIN TO GO A LITTLE MORE IN DEPTH, UH, ON THE ACTUAL TRANSITION PROCESS AND THE TIMELINE.
DOUG POOR FROM FIDELITY INVESTMENTS.
THAT'S A REALLY UNFORTUNATE NAME FOR SOMEBODY IN THE FINANCE BUSINESS.
LET THE RECORD REFLECT TO MAKE IT EVEN BETTER.
I HAVE A BROTHER NAMED RICHARD, SO RICH, POOR, SO
UM, WHAT I INTENDED TO DO IS SHARE A BIT OF BACKGROUND ABOUT WHO WE ARE AS AN ORGANIZATION AND ALSO WALK THROUGH THE, THE KEY REASONS THAT WE'RE SUPPORTING THE CITY OF HOUSTON, BUT ALSO THE TRANSITION PLAN.
SO FOR THOSE THAT, UM, PERHAPS DO NOT KNOW FIDELITY AS AN ORGANIZATION, WE ARE A PRIVATELY HELD ENTITY, FAMILY OWNED, AND HAVE BECOME THE LARGEST RECORD KEEPER IN THE THE WORLD WHEN IT COMES TO RETIREMENT BENEFITS.
AT THE CORE OF WHAT WE DO IS BENEFITS ADMINISTRATION AND WE'VE BEEN IN BUSINESS FOR THE LAST 80 YEARS.
WE HAVE A DEEP AND STRONG PARTNERSHIP WITH HOUSTON, WITH OFFICES LOCATED THROUGHOUT THE ENTIRE METRO AREA.
AND WE'RE PROUD TO SUPPORT NOT ONLY THE CITY OF HOUSTON, BUT MANY OF YOUR PEERS, INCLUDING ALL THE HEALTH SYSTEMS IN TEXAS MEDICAL CENTER AS WELL AS THE UNIVERSITIES THAT CAUGHT HOUSTON HOME.
WHEN WE LOOK AT THE, THE, UM, SLIDE THAT YOU'RE SEEING HERE, UM, ARIF MENTIONED THE IMPROVEMENTS THAT WERE MADE AND THAT'S REALLY WHAT WE STAND ON IS QUALITY BEING THE DIFFERENTIATOR.
SO AS WE APPROACH THIS TRANSITION, WE PARTNERED CLOSELY WITH THE CITY TO IDENTIFY AREAS TO MODERNIZE THE PLAN, MAKE THINGS SIMPLER FOR THE ADMINISTRATIVE TEAM, BUT ALSO MAKE IT SIMPLER FOR THE EMPLOYEES AND RETIREES THAT MAINTAIN THIS IMPORTANT BENEFIT.
AND HOPEFULLY SOME OF YOU HAVE EXPERIENCED THAT AS THIS TRANSITION HAS BEEN COMPLETED.
UM, AS WE LOOK LONG TERM, WE ALSO UNDERSTAND THAT THIS IS A SEVEN YEAR CONTRACT AND CERTAINLY ONE THAT WE HOPE TO EXTEND BEYOND THAT, WE VIEW THIS AS A GENERATIONAL CHANGE.
SO WE WANT TO CONTINUE TO INVEST IN WHAT WE DO DAY IN, DAY OUT, AND THAT'S WHAT YOU CAN BE ASSURED OF FROM OUR ORGANIZATION.
THE LAST PIECE I'LL MENTION ABOUT OUR BACKGROUND IS THE FOUNDATION OF WHAT WE DO AND WHY WE DO IT.
IT'S AT THE END OF EVERY DOLLAR IS AN INDIVIDUAL, SOMEONE THAT HAS ENTRUSTED PART OF THEIR LIFE SAVINGS TO US TO RECORD, KEEP AND PROTECT, AND MAKE SURE THAT IT'S THERE FOR THEM WHEN THEY NEED IT MOST IN RETIREMENT.
SO THAT IS AT THE CORE OF EVERYTHING WE DO, WHETHER YOU'RE VISITING WITH YOUR REPRESENTATIVE THAT WE HAVE HERE, SUPPORTING THE CITY, OR YOU WALK INTO OUR OFFICE OR YOU CALL US OR YOU VISIT US ON THE WEBSITE, IT'S MAKING SURE WE DO WHAT'S RIGHT BY OUR CUSTOMER WHEN WE LOOK AT THE UNDERLYING COMPONENTS.
ON THE NEXT SLIDE, YOU'LL SEE THAT THAT REALLY BREAKS DOWN TO A NUMBER OF AREAS, BUT EACH OF THEM COME BACK TO THE PARTICIPANT EXPERIENCE, WHETHER IT BE THROUGH THE MOBILE APPLICATION, THAT YOU CAN ACCESS AND MAKE CHANGES NOW
[00:55:01]
WITH RESPECT TO HOW MUCH IS COMING OUT OF YOUR PAYCHECK ON A REGULAR BASIS, FEEDING THAT STRAIGHT INTO PAYROLL ON AN AUTOMATED BASIS VERSUS MANUAL, OR, UM, HAVING THE ABILITY TO MODEL YOUR BENEFITS MINUTE BY MINUTE, SECOND BY SECOND.SO OVER THE LONG TERM, WE HOPE THESE ADVANTAGES WILL COME THROUGH TO YOU AS INDIVIDUALS, MUCH LIKE THEY DID TO THE COMMITTEE, AS THEY REVIEWED THE MARKETPLACE.
AS WE WENT THROUGH THIS PROCESS.
UM, IT WAS A, A LONG REVIEW PROCESS AND WE WERE GRATEFUL FOR THE INITIAL SELECTION.
UM, I WAS HERE AT COUNCIL MEETING ON NOVEMBER 5TH, UM, AS YOU EVALUATE WITH A, A BULK OF OTHER, UM, ITEMS, AND WE ARE GRATEFUL FOR THE TRUST PLACED IN US.
ON THE NEXT SLIDE, YOU'LL SEE THE TIMELINE THAT WE WENT THROUGH FROM THAT POINT FORWARD, IMMEDIATELY UPON APPROVAL ON THE FIFTH, WE BEGAN A, AN INTENSIVE TRANSITION PROCESS.
WE HAVE A FULL TEAM THAT CAME INTO HOUSTON, UM, SAT SIDE BY SIDE WITH PAYROLL, AND IT, AND OTHERS ROLLED UP OUR SLEEVES TO SAY, WHAT CAN WE DO AND HOW CAN CAN WE IMPROVE THE PROGRAM? OVER THE COURSE OF THE NEXT SEVEN MONTHS, WE WORKED CLOSELY WITH YOUR PRIOR RECORD KEEPER, EMPOWER, AND COORDINATED THE TRANSITION PROCESS.
UH, MANY OF YOU SAW COMMUNICATIONS, UM, SOMETIMES PERHAPS FOR THE FIRST TIME.
FOR THE FIRST TIME, WE COMMUNICATED WITH EVERY SINGLE ELIGIBLE INDIVIDUAL WITHIN THE CITY.
WE ALSO ESTABLISHED ACCOUNTS FOR EVERY ELIGIBLE PERSON, SO WE CAN NOW COMMUNICATE TO THEM AND, AND ENCOURAGE THEM TO SAVE IF THEY HAVEN'T DONE SO IN THE PAST.
AND THEN EFFECTIVE JUNE 1ST, THE MONEY MOVED FROM THE RECORD KEEPER, THE PRIOR RECORD KEEPER TO FIDELITY 100% IN KIND, WHICH MEANS THE INVESTMENTS DID NOT CHANGE, BUT THE UNDERLYING RECORD KEEPING DID.
SO WE'RE THE ADMINISTRATOR OF THE PLAN.
THE INVESTMENTS ARE CHOSEN BY THE CITY AND A COMMITTEE THAT'S BEEN SELECTED BY THE ORGANIZATION.
BUT ON JUNE 1ST, ALL OF THOSE INVESTMENTS CAME OVER IN KIND, WE RECONCILED THOSE, AND THEN THE PLAN WENT LIVE, SHALL WE SAY, IN THE LATTER PART OF JUNE.
AND THAT'S WHEN YOU ALL MAINTAINED OR REGAINED ACCESS TO THOSE ASSETS.
UM, DURING THAT PERIOD, EVERYONE WAS FULLY INVESTED.
WE'VE BEEN FORTUNATE TO, TO SEE POSITIVE MARKETS SINCE, UM, WE KNOW THAT CHANGES ON A DIME DAY TO DAY.
UM, OUR GOAL REMAINS TO PROVIDE THE SOLID ADMINISTRATIVE PROCESS THAT YOU'RE LOOKING FOR, UM, THROUGHOUT THE, THE TERM OF THE CONTRACT.
SO THAT COVERS THE, THE, UM, THE PROCESS ITSELF.
I AM GONNA TURN IT OVER TO VAN ADAMS. VAN REPRESENTS THE HEAD OF THE RELATIONSHIP TEAM THAT WILL BE SUPPORTING THE CITY GOING FORWARD, AND HE WILL WALK US THROUGH THE, THE SUBSEQUENT SLIDES.
I, I REPRESENT THE CITY ON, I'M, I'M NEW ON IT, ON THIS DEFERRED COMPENSATION BOARD.
AND I'VE BEEN IMPRESSED WITH, UM, FIDELITY'S, YOU KNOW, REALLY INVOLVEMENT.
I MEAN, YOU CAN GET, YOU CAN GO IN ANY OFFICE, YOU CAN CALL VAN, YOU CAN CALL ANY OF THE PEOPLE.
I MEAN, THEY'RE GONNA HELP YOU OUT ON THIS, ON WHATEVER'S IN YOUR ACCOUNT.
AND THANK YOU ALL FOR THE TIME THIS MORNING.
WE REALLY APPRECIATE, UM, BEING HERE WITH YOU ALL.
UM, I'M THE RELATIONSHIP MANAGER.
AGAIN, MY NAME IS VAN ADAMS. UH, AND WHAT THAT MEANS AS YOUR RELATIONSHIP MANAGER IS THAT I LEAD THE SERVICE TEAM THAT WORKS DIRECTLY WITH THE CITY TO HELP ADMINISTER YOUR RETIREMENT PLAN.
UH, AND I DON'T THINK I'VE GIVEN MY MOBILE PHONE OUT TO EVERYONE, BUT I CAN.
UM, I AM THE SINGLE POINT OF CONTACT INTO FIDELITY WHEN YOU NEED SOMETHING FROM FIDELITY.
UM, I'LL JUST SAY THAT WE ARE THRILLED TO HAVE THIS PARTNERSHIP WITH THE CITY, AND I DO WANNA GIVE JUST A QUICK SHOUT OUT TO ARIF AND HIS TEAM FROM THE FANS DEPARTMENT FOR ALL THE WORK THAT THEY'VE DONE TO HELP SUPPORT THIS TRANSITION.
UH, WE WENT LIVE WITH THE CITY OF HOUSTON ON JUNE 26TH, BUT THE WORK STARTED WAY BEFORE THEN.
AND DOUG ALLUDED TO A LITTLE BIT OF WHAT THAT LOOKED LIKE DURING THE TRANSITION, BUT I DID WANT TO HIGHLIGHT A COUPLE THINGS.
UH, ONE IS THE COMMUNICATION STRATEGY THAT WE PUT IN PLACE WITH THE HELP OF THE CITY.
UH, AND THEN I WANNA TALK A LITTLE BIT ABOUT THE RESOURCES THAT ARE NOW AVAILABLE TO YOUR EMPLOYEES NOW THAT YOU'RE WITH FIDELITY.
UM, SO WE HAD A ROBUST COMMUNICATION STRATEGY.
IT WAS A TRUE PARTNERSHIP WITH THE CITY AND FIDELITY.
WE STARTED WITH A TRANSITION ANNOUNCEMENT ON MAY 1ST THAT CAME OUT THROUGH THE CITY, AN EMAIL TO ALL OF YOUR EMPLOYEES, LETTING THEM KNOW ABOUT THE CHANGE TO COME.
FIDELITY FOLLOWED UP ABOUT A WEEK LATER, UH, WITH SOMETHING CALLED OUR TRANSITION GUIDE THAT WE ACTUALLY MAILED OUT TO ALL OF YOUR PARTICIPANTS.
SO THEY RECEIVED A PAPER VERSION OF EVERYTHING THAT WAS GOING TO BE, UM, INCLUDED IN THE TRANSITION.
AND THE CITY THEN SENT THAT SAME TRANSITION GUIDE OUT VIA EMAIL.
SO THEY RECEIVED BOTH A PRINT COPY AND AN EMAIL COPY OF THE TRANSITION GUIDE.
WHEN WE FINALLY WENT LIVE ON JUNE 26TH, WE SENT OUT AN EMAIL TO ALL OF YOUR EMPLOYEES LETTING KNOW YOU WERE FINALLY LIVE AND TO LOG INTO NET BENEFITS IF THEY DIDN'T HAVE A VALID EMAIL ACCOUNT ON FILE.
UH, AND THEN WE DID ONE FINAL COMMUNICATION IN JULY, A FOLLOW UP CONVERSATION, JUST REITERATING THAT THE PLAN WAS NOW LIVE AND THAT WELCOMING YOUR EMPLOYEES TO LOG INTO NET BENEFITS AND START TO TAKE ADVANTAGE OF THEIR ACCOUNT.
[01:00:01]
IT, IT WAS FOUR DIFFERENT COMMUNICATIONS.SOME CAME FROM THE CITY, SOME CAME FROM FIDELITY.
AND WE DID IT THAT WAY BECAUSE WE WANTED TO MAKE SURE THAT TRULY WE TOUCHED AND REACHED EVERY PERSON THAT WE POSSIBLY COULD, THAT THEY WERE AWARE OF THE TRANSITION AND THAT THEY WERE FAMILIAR WITH FIDELITY, SO THAT WHEN THE ASSETS TRANSFERRED OVER TO FIDELITY AND THEY WERE LOGGED INTO NET BENEFITS, THAT WASN'T THE FIRST TIME THEY'D HEARD AND SEEN THE NAME.
SO AGAIN, THANK YOU TO ARIF AND THE FINANCE DEPARTMENT FOR ALL THE SUPPORT IN HELPING, UM, GET THOSE COMMUNICATIONS OUT.
ON THE NEXT SLIDE, UM, DOUG SPOKE TO MANAGED ACCOUNTS A LITTLE BIT, AND YOU HAVE REALLY HIGH UTILIZATION OF MANAGED ACCOUNTS AT THE CITY.
OVER HALF OF YOUR ASSETS IN THE RETIREMENT PLAN ARE IN MANAGED ACCOUNTS.
SO WE WANTED TO BE VERY THOUGHTFUL IN HOW WE COMMUNICATED OUT TO THOSE PARTICIPANTS THAT HAD MANAGED ACCOUNTS, UM, SO THAT THEY WERE AWARE OF THE TRANSITION AS WELL.
THEY RECEIVED EVERYTHING THAT I JUST MENTIONED, ALL THOSE DIFFERENT COMMUNICATIONS IN ADDITION TO A SEPARATE COMMUNICATION STREAM, WHICH WAS TWO EMAILS THAT WENT OUT, ONE IN JUNE, ONE IN JULY, THAT GAVE THEM THE OPPORTUNITY TO EITHER OPT INTO MANAGED ACCOUNTS, MOVING FORWARD, OPT OUT, AND LET THEM KNOW IF THEY TOOK NO ACTION, THEY WERE GOING TO BE AUTOMATICALLY RE-ENROLLED INTO MANAGED ACCOUNTS.
UM, THAT AUTOMATIC RE-ENROLLMENT DID JUST OCCUR, I BELIEVE, A COUPLE OF WEEKS AGO.
UM, AND NO SURPRISE AND EXPLAIN MANAGED ACCOUNTS.
WHAT, WHAT DO YOU MEAN BY THAT? YES, AND I, I THINK THERE ARE SOME, UM, PEOPLE IN THE ROOM THAT HAVE MANAGED ACCOUNTS, I'M ASSUMING.
UM, BUT IT'S ESSENTIALLY A, A PERSONALIZED, UH, EXPERIENCE THAT, UM, ALLOWS YOUR PARTICIPANTS TO HAVE THEIR INVESTMENTS MANAGED FOR THEM USING THE LINE, UM, USING THE FUNDS THAT ARE, UH, INCLUDED IN THE CORE LINEUP.
FIDELITY WILL, UM, MANAGE THOSE DIFFERENT BASED OFF OF YOUR, UM, YOUR AGE, YOUR RISK TOLERANCE, UM, YOUR PERSONALIZATION, UM, HOW COMPLEX YOUR FINANCIAL SITUATIONS ARE.
FAILURE WILL MANAGE THOSE ASSETS, UM, ACROSS THE FUNDS AND THE LINEUP.
I THINK THAT HAD TO, AND THAT WOULD, UM, COMPARE TO THOSE THAT ARE SELF-DIRECTED IN THE SENSE THAT THEY'RE PICKING THEIR OWN INVESTMENTS, UM, PERHAPS ADJUSTING THOSE INVESTMENTS ON A REGULAR BASIS.
UM, SO YOU'RE OFFERING BOTH VARIETIES TO YOUR EMPLOYEES, THOSE THAT ARE SELF-DIRECTED VERSUS THOSE WOULD LIKE FIDELITY TO TAKE CARE OF IT FOR THEM.
SO THEY RECEIVED THOSE TWO SEPARATE COMMUNICATIONS, NO SURPRISE, ALMOST ALL OF YOUR PARTICIPANTS THAT WERE IN MANAGED ACCOUNTS DECIDED TO MOVE FORWARD WITH FINANCE MANAGED ACCOUNTS AT FIDELITY.
I THINK WE HAD LESS THAN A HUNDRED OPT OUT OF, OF THE PROCESS.
IF WE GO TO THE NEXT SLIDE, I DID WANNA HIGHLIGHT SOME OF THE NEW RESOURCES THAT ARE GOING TO BE AVAILABLE TO YOUR EMPLOYEES.
UH, I'LL START WITH WHAT I THINK IS THE MOST IMPORTANT ONE, AND THAT IS YOUR DEDICATED WORKPLACE FINANCIAL CONSULTANT.
I DON'T KNOW, GENE, IF WE COULD HAVE YOU STAND UP.
LOOKS LIKE HIS PICTURE THERE HE IS.
HE'S GONNA BE A GREAT RESOURCE FOR YOU ALL.
HE IS LOCAL TO THE HOUSTON AREA, COMPLETELY LICENSED.
HE'S BEEN IN FINANCIAL SERVICES FOR OVER 12 YEARS.
AND I THINK THE MOST IMPORTANT THING IS HE'S A TRUE EXPERT IN YOUR PLAN.
IT'S WHAT HE DOES EVERY DAY, IS WORK WITH YOUR 4 57 VIEW PLAN.
HE'S AVAILABLE FOR, UH, APPOINTMENTS WITH YOUR EMPLOYEES FOR ONE-ON-ONES.
HOWEVER, YOUR EMPLOYEES, UM, PREFER TO ENGAGE WITH GENE.
UH, HE CAN ALSO DO SOMETHING THAT WE CALL A ONE TO MANY EVENT.
SO IF THERE'S EVER A TOPIC THAT YOU ARE HEARING, UH, IS OF SPECIFIC INTEREST TO MORE EMPLOYEES AT, AT THE CITY, UH, I KNOW, UH, A POPULAR ONE IS A DIFFERENCE BETWEEN A ROTH AND A PRE-TAX DEFERRAL.
UM, HE CAN DO A WEBINAR, A SEMINAR, A WORKSHOP, AND MEET WITH A LARGER GROUP OF EMPLOYEES TO HAVE THOSE CONVERSATIONS.
UH, IN FACT, I THINK JUST LAST WEEK HE WAS OUT DOING A WORKSHOP WITH THE, UM, THE CITY'S EMPLOYEE ASSISTANCE PROGRAM.
IF YOU HAVE ANY QUESTIONS FOR HIM, HE HAS AGREED TO STAY AFTER THE MEETING TO ADDRESS ANY QUESTIONS ON THE RETIREMENT PLAN.
ANOTHER RESOURCE THAT WE HIGHLIGHT ON THE NEXT SLIDE ARE OUR INVESTOR CENTERS.
I THINK DOUG DID MENTION THIS.
UM, ON THIS SLIDE, WE'RE SHOWING ALL THE INVESTOR CENTERS THAT WE HAVE IN THE HOUSTON AREA.
UH, WE ALSO HAVE OVER 200 INVESTORS CENTERS NATIONWIDE FOR FIDELITY.
UM, AND THE BENEFIT HERE IS IF IS HAVING A CONVERSATION WITH, UM, WITH ONE OF YOUR EMPLOYEES ABOUT THE RETIREMENT PLAN, AND MAYBE THAT CONVERSATION VEERS OFF INTO, UH, ESTATE PLANNING OR TAX ADVANTAGED INVESTING, OR INCOME IN RETIREMENT OR SOMETHING OUTSIDE THE RETIREMENT PLAN, HE'S ABLE TO REFER THOSE EMPLOYEES OVER TO ONE OF OUR REPRESENTATIVES AT THE INVESTOR CENTER TO HAVE THAT BROADER CONVERSATION ON RETIREMENT.
THOSE EMPLOYEES ARE SALARIED, THEY'RE NON-COMMISSIONED, AND I BELIEVE THE CLOSEST INVESTOR CENTER TO WHERE WE ARE TODAY WOULD BE THE, THE HIGHLAND VILLAGE, UM, INVESTOR CENTER JUST 15 MINUTES AWAY.
SO, UM, IN ADDITION TO MEETING WITH JEAN, GOING TO AN INVESTOR CENTER CALLING INTO 1-800-FIDELITY, WE OF COURSE HAVE OUR NET BENEFITS, UM, WEBSITE AND MOBILE APP.
UM, THIS IS IF YOUR, IF YOUR EMPLOYEES WANT TO JUST LOG IN AND WORK DIRECTLY THROUGH FIDELITY'S
[01:05:01]
PLATFORM, THEY CAN DO THAT.IT IS WHEN THEY LOG IN, COMPLETELY CUSTOMIZED AND TAILORED TO THE CITY OF HOUSTON.
UH, AND THEY CAN DO ANYTHING IN THERE FROM ENROLLING INTO THE PLAN, MAKING ANY CHANGES TO THEIR DEFERRALS OR INVESTMENTS, ADDING A BENEFICIARY.
ANYTHING THAT THEY WOULD WANNA DO WITH GENE, THEY CAN DO ONLINE VIA THE NET BENEFITS BENEFITS APP.
SO IS THAT A FIDELITY APP OR NET BENEFITS APP? WHAT'S THE, WHAT'S THE APP CALLED? IT'S, IS IT JUST A FIDELITY APP? IT'S IT'S A FIDELITY APP.
AND WHEN YOU LOG INTO IT, YOU, YOU'LL LOG INTO NET BENEFITS.
UM, AND I WILL MENTION THAT FIDELITY NOW TAKES A MOBILE FIRST APPROACH TO ANY ENHANCEMENTS THAT WE MAKE.
AND THE REASON THAT WE DO THAT IS WE FOUND THAT AT THIS POINT, TWO THIRDS OF ALL THE TRAFFIC GOING INTO NET BENEFITS IS ACTUALLY BEING DONE VIA PHONE, UH, WHICH IS NOW AVAILABLE IN ENGLISH, AND HAPPY TO ANNOUNCE THIS NOW IN SPANISH AS WELL.
UM, DOUG, I THINK SPOKE TO THE IT AND THE, THE CYBERSECURITY INVESTMENT THAT FIDELITY MAKES.
UM, AND PART OF THE REASON THAT WE, WE DO THAT IS THE TRAFFIC THAT WE SEE IN NET BENEFITS.
LAST YEAR WE HAD OVER 30 MILLION TRANSACTIONS THAT WE SUPPORTED ON NET BENEFITS FOR OVER 444 MILLION USERS THAT VISITED THE SITE.
I BELIEVE THAT IS ALL THAT WE HAD IN OUR, UM, PRESENTATION.
THANK YOU VERY MUCH, MUCH FOR, ARE EXCITED TO HAVE YOU AND COUNCIL MEMBER ELLA.
THANK YOU BOTH FOR BEING HERE FOR THE PRESENTATION.
I'M, UH, ONE OF THE NEWER COUNCIL MEMBERS HERE.
UH, IS THIS SOMETHING THAT I SHOULD BE AWARE OF FOR MY DISTRICT C STAFF? IS THIS SOMETHING THAT I SHOULD BE AWARE ABOUT FOR MYSELF? UM, JUST KIND OF, YES.
EVERYBODY NEEDS TO GET IT, MAN.
SHOULD I CALL NITA, LIKE, WHAT'S GOING ON HERE? YEAH.
SO, UM, JEAN WOULD BE HAPPY TO SCHEDULE MEETINGS FOR EACH OF YOUR, UM, YOUR TEAM MEMBERS.
UM, PERHAPS A GROUP SESSION TO TALK ABOUT THE BENEFIT.
I MENTIONED THAT, UM, WE ESTABLISHED ALL EMPLOYEES AS, UM, PARTICIPANTS, IF YOU WILL, THAT ARE ELIGIBLE TO JOIN THE PLAN.
SO NOW YOU'RE GONNA START TO SEE COMMUNICATIONS TO NEW HIRES AS WELL AS THOSE THAT PERHAPS HAVE NOT BEEN COMMUNICATED TO IN THE PAST, ENCOURAGING THEM TO LEARN MORE.
UM, AND LEVERAGE THIS OPTIONAL BENEFIT TO DEFER, UM, MONEY TOWARDS RETIREMENT.
SO WE'D WELCOME THAT OPPORTUNITY TO ENGAGE FURTHER.
I WISH SOMEBODY AT MY, AT YOUR STAFF'S AGE, IT'LL COME TO ME.
I JUST WANTED TO SAY, I HAD ONE OF MY EMPLOYEES THAT VISITED WITH Y'ALL LAST WEEK AND WAS REALLY THRILLED WITH THE, UH, INTERACTION AND THOUGHT IT WAS VERY INFORMATIVE.
AND WE'RE HAPPY TO HAVE YOU AT THE CITY OF HOUSTON.
AND JEAN, YOU'RE GONNA BE GETTING YOUR PHONE'S GONNA BLOW UP.
AND THANK YOU ARIF AND ALL THE TEAM AT FINANCE AND HR THAT MADE THIS GO, THIS TRANSITION GO SO SMOOTHLY.
ANY PUBLIC COMMENT ABOUT THIS ITEM? ABOUT THE 4 57 B? OKAY.
THANK YOU VERY MUCH, GENTLEMEN.
AND WE'LL MOVE ON TO AGENDA ITEM FIVE, WILL JONES ON SALES TAX? OKAY.
SO WE'RE HERE TO TALK ABOUT SALES TAX TODAY.
UM, A LOT OF TIMES I FEEL LIKE, UH, SALES TAX TENDS TO GET OVERLOOKED.
WE'VE BEEN TALKING A LOT ABOUT SALES TAX.
UM, SO, AND WE TALK A LOT ABOUT THE VOLATILITY IN SALES TAX.
SO I FELT LIKE NOW IS A GOOD TIME TO KIND OF DUST OFF SOME OF THE, YOU KNOW, INFORMATION ON SALES TAX AND DO A LITTLE BIT OF A DEEP DIVE.
UM, SO LET'S GO TO THE FIRST SLIDE, PLEASE.
SO IN THIS REVIEW, WE'LL TAKE A LOOK AT, AGAIN, HOW SALES TAX IS GENERATED.
AGAIN, SOME OF THESE THINGS YOU MAY KNOW, UH, SOME OF THESE THINGS YOU MAY NOT KNOW, UH, WHY SALES TAX IS MORE VOLATILE THAN SOME OF THE OTHER REVENUE SOURCES.
UM, LOOK AT SOME OF THE HISTORICAL TRENDS AND WHAT ECONOMIC CONDITIONS COULD MEAN FOR FUTURE COLLECTIONS.
AND THEN JUST TALK ABOUT, UH, POTENTIAL KEY RISKS GOING FORWARD.
OKAY, SO SALES TAX GENERATION AND ALLOCATION.
SO LET'S TALK A LITTLE BIT ABOUT IT.
WE SEE YOU GO AND BUY YOUR, YOUR A HUNDRED DOLLARS NIKE SHOES.
SO FOR EVERY A HUNDRED DOLLARS, WE HAVE THAT 8.25% IN SALES TAX, RIGHT? AND SO JUST TO BREAK IT DOWN A LITTLE BIT, THE STATE ALWAYS GETS THE 6.25%.
SO IN STATE LAW, THERE'S ALSO A CAP ON WHAT THE MUNICIPALITIES CAN, CAN, UM, CAN GO UP TO, WHICH IS 2%.
[01:10:01]
FOR HOUSTON WE GET 1%.SO FOR, UH, MUNICIPALITIES THAT TEND TO HAVE SOME TYPE OF TRANSIT AUTHORITY, THEY TEND TO GET, UH, A PERCENTAGE OF THAT SALES TAX.
SO MOST OF THE LARGER CITIES IN TEXAS, UH, WILL ALSO SPLIT THAT 2% BETWEEN THEIR TRANSIT AUTHORITY, BUT THAT IS NOT ALWAYS THE CASE.
SO, LIKE, FOR EXAMPLE, SUGAR LAND, UH, THEY ACTUALLY KEEP 1.5% OF, OF THEIR SALES TAX IN THEIR GENERAL FUND.
THEY DON'T, UH, CONTRIBUTE TO A, UH, UH, A TRANSIT AUTHORITY.
UH, BUT THE IMPORTANT PART IS IT'S SET BY STATE LAW ON WHAT WE ARE ALLOWED TO COLLECT.
6.25, THE STATE ALWAYS GETS, AND THEN 2% TO THE MUNICIPALITIES.
AND THEN YOU SEE AT THE VERY END, IT'S, UH, DISTRIBUTED TO THE CITY ABOUT TWO MONTHS LATER.
SO THIS MONTH WE'LL BE RECEIVING OUR JULY SALES TAX RECEIPT.
SO THAT'S KIND OF A BREAKDOWN OF HOW IT WORKS.
AND ALSO JUST A LITTLE BIT MORE, EVEN THOUGH, SO METRO DOES GET THE 1%.
WE ALSO, THERE'S SOME SHARING IN THAT 1% THAT METRO RECEIVES.
WE HAVE OUR GENERAL MOBILITY PROGRAM.
SO SOME OF THAT STILL COMES BACK TO THE CITY.
UM, ALSO, SO WHEN WE TALK ABOUT SALES TAX, WE ALSO HAVE HAVE TO KIND OF MENTION LPAS.
UM, SO THESE ARE LIMITED PURPOSE, UH, ANNEXATIONS, UH, WE, IT'S ABOUT 230 OF 'EM.
THERE'S, UH, COMMERCIAL AREAS OUTSIDE OF THE CITY LIMITS.
UM, AND SO WITH THESE AGREEMENTS, UM, THE CITY WILL COLLECT THE FULL 1% AND THEN WE SHARE HALF OF THAT WITH THE, UH, WITH THE MUD.
SO WE, WE SEE THAT IN OUR GROSS REVENUE.
ON THE EXPENSE SIDE, YOU'LL SEE WHERE WE PAY OUT.
SO WE BUDGET EVERY YEAR TO PAY OUT, UH, THOSE PORTIONS OF THE LPA, WHICH IS THEIR HALF.
UH, SO YOU'LL SEE THIS YEAR PROJECTING 82 MILLION.
THAT NUMBER'S NOT FINAL YET IS TYPICALLY ABOUT 9% OF OUR TOTAL, UH, SALES TAX.
UH, THAT'S THE PORTION THAT TYPICALLY WE SEND OUT TO, TO LPAS, BUT AGAIN, IT'S IMPORTANT TO KIND OF DISCUSS THAT AT THE SAME TIME WHEN YOU TALK ABOUT SALES TAX.
SO AGAIN, THIS IS A SLIDE WE'RE ALL FAMILIAR WITH.
WHEN YOU LOOK AT THE BREAKDOWN OF THE GENERAL FUND REVENUE, UH, AGAIN, SALES TAX BEING THE SECOND LARGEST, UM, AND TOGETHER PROPERTY AND SALES TAX MAKE UP ABOUT 48% OF OUR TOTAL REVENUE.
AGAIN, ALSO WANTED TO KINDA SHOW SOME OF THE OTHER TEXAS CITIES.
YOU CAN SEE HOUSTON IS BY FAR, UH, WELL AHEAD IN TERMS OF OUR SALES, SALES TAX REVENUE ABOUT TWO TIMES.
UH, SO WE WOULD COLLECT NEARLY TWICE THE SALES TAX REVENUE OF THE, THE NEAREST HIGHEST CITY.
UM, AGAIN, YOU CAN SEE, UH, EVEN WITH THE OTHER CITIES, SALES TAX IS A, A, A LARGE REVENUE SOURCE, BUT FOR HOUSTON, IT'S A SIGNIFICANT REVENUE SOURCE.
AND SO WHEN WE TALK ABOUT THE VOLATILITY, YOU'LL KIND OF SEE WHAT THAT, WHAT THAT MEANS FOR HOUSTON.
OKAY, AGAIN, SO WE, WE TALK A LOT ABOUT VOLATILITY.
UM, AND SO WHAT DRIVES THAT IS TYPICALLY OUTSIDE FORCES.
UM, WE SEE NOW WE HAVE A STORM, A TROPICAL STORM OUT THERE.
THAT'S WHAT, YOU KNOW, THAT'S ONE OF THE DEFINITIONS OF VOLATILITY.
UM, GEOPOLITICAL CONFLICT, THINGS HAPPENING AROUND THE WORLD.
UM, EVEN ONE TIME SPORTING EVENTS WE JUST SAW WITH WORLD CUP.
UH, SO THOSE ARE OUTSIDE FORCES THAT IMPACTS THE HOUSTON ECONOMY.
UM, AND THEN AS A RESULT OF THAT, IT'S GOING TO IMPACT OUR SPENDING, UH, BEHAVIOR, WHETHER IT'S A STORM, UH, WHETHER IT'S A PANDEMIC, UH, WHETHER IT'S, YOU KNOW, A, A ONE-TIME SPORTING EVENT.
UM, THOSE OUTSIDE FORCES DICTATE HOW WE SPEND.
AND THEN IT ALSO DRIVES OUR, UH, OUR CITY SALES TAX REVENUE.
SO THE NEXT SLIDE WHERE YOU WILL SEE THAT, HOW THAT'S HAPPENED OVER THE YEARS.
UH, SO THIS IS A, A PERFECT EXAMPLE OF WHAT WE MEAN BY THE VOLATILITY IN SALES TAX.
UM, GOING ALL THE WAY BACK FROM 2007, UH, UP TO 2026.
AND AGAIN, FOR JUST ABOUT EVERY BAR ON THIS CHART, I WAS THERE IN FINANCE, I EXPERIENCED FIRSTHAND, UM, ALL THESE LINES YOU SEE GOING UP AND DOWN.
AND I KNOW COUNCIL MEMBER ALCORN, I THINK YOU WERE HERE, I DON'T KNOW IF ANY OF THE REST OF YOU WERE HERE AROUND THAT TIME, BUT WE'VE EXPERIENCED SOME CRAZY, SOME CRAZY THINGS, RIGHT? AND, UH, A LOT OF THAT WAS DRIVEN AROUND SALES TAX.
SO YOU CAN SEE, UH, WHAT THE VOLATILITY REALLY LOOKS LIKE.
SO LOOKING AT, UH, 2010, THAT WAS THE IMPACT OF THE GREAT RECESSION.
IF YOU REMEMBER WHEN THE HOUSING MARKET COLLAPSED, STARTING AROUND 2007 THROUGH 2010, WELL, IT HIT HOUSTON KINDA LATE.
UM, BUT YOU'LL SEE WE HAD A HUGE DIP, 7.5%, UH, DIP IN OUR SALES TAX.
SO AGAIN, AS WE TALKED ABOUT, UH, THESE OUTSIDE, UH, THE ECONOMY IN THIS CASE OF THE, THE COLLAPSE OF THE HOUSING MARKET, AND, AND WHEN PEOPLE ARE UNCERTAIN, THEY STOP SPENDING.
AND SO THAT HAD A VERY BIG IMPACT ON THE CITY BED.
SO REALLY FROM THAT TIME, FROM 2010 UP THROUGH 2011, 12,
[01:15:01]
UH, BUT THAT DIP AND, AND WE'RE NOT EVEN TALKING ABOUT PROPERTY TAX, RIGHT? THIS IS BEFORE WE REACHED THE CAP.WE DIDN'T REACH THE CAP UNTIL 2015.
SO AS A RESULT OF THAT, DURING THAT LITTLE THREE YEAR PERIOD, UH, WE HAD TO TAKE MAJOR, UM, ACTIONS IN THE CITY.
UH, WE DID FURLOUGHS, UH, WE DID LAYOFFS.
WE SHUT DOWN LIBRARIES, WE SHUT DOWN PARKS.
UM, SOME DEPARTMENTS HAD UP TO 20 SOMETHING PERCENT, UH, REDUCTIONS.
UM, AND SO WE REALLY LEARNED A LESSON DURING THAT TIME.
AND YOU'LL HEAR MYSELF AND YOUR HEAD DIRECTOR, AB BAKI SAY, WHY WE WE BUDGET CONSERVATIVELY ON SALES TAXES BECAUSE OF SOME OF THESE THINGS WE EXPERIENCED.
'CAUSE DURING THAT TIME, WE HAD TO ACTUALLY REDUCE OUR, UH, REVENUE PROJECTION THROUGHOUT THE YEAR, UM, UH, TO DEAL WITH SOME OF THESE, UH, THESE, UH, ECONOMIC UNCERTAINTIES.
AND SO, AGAIN, THAT WAS A, A VERY ROUGH TIME FOR THE CITY.
UM, AND AGAIN, LIKE I SAID, WITH THE FURLOUGHS, AND, AND THAT WAS ALSO AROUND THE TIME WHERE THAT'S WHY I KIND OF GET HEARTBURN WHEN I THINK ABOUT THE, THE CREDIT WE PUT IN THE BUDGET, BECAUSE WE DID THE SAME THING.
WE PUT $22 MILLION CREDIT IN THE BUDGET TO HELP BALANCE IT, AND IT DID NOT WORK.
AND SO WHEN I SAW THAT, I'M LIKE, DON'T DO THAT
AGAIN, THAT WAS WHEN THE ENERGY COLLAPSED.
AGAIN, YOU SEE HOW SENSITIVE SALES TAX CAN BE WHEN THERE'S CHANGES IN THE MARKET.
AGAIN, WE HAD TO TAKE SOME DRASTIC ACTIONS AND DO SOME REDUCTIONS.
AND THEN YOU SEE IN 2020 WITH THE PANDEMIC, THE SALES TAX DECREASED BY 1%, BUT THEN YOU SEE THIS HUGE SPIKE.
UM, SO COMING OUT OF THE PANDEMIC DURING KNOW, DURING THAT TIME WE HAD, UH, FEDERAL DOLLARS FLOWING INTO THE MARKET.
SO EVEN THOUGH, YOU KNOW, YOU KNOW, CERTAIN CITIES WERE SHUT DOWN FOR A PERIOD OR NOT, CERTAIN CITIES, THE THE WHOLE NATION WAS SHUT DOWN FOR A CERTAIN AMOUNT OF TIME.
WE DID SEE THAT DIP, BUT COMING OUT OF THAT, PEOPLE CONTINUED TO SPEND AND SPEND AT RECORD LEVELS.
SO THAT'S HOW YOU GO FROM 1.1% ALL THE WAY UP TO LIKE 16% INCREASE.
AND AGAIN, VOLATILITY DOES NOT MEAN, UM, IT'S GONNA BE NEGATIVE.
IT MEANS THAT THEY'RE GONNA BE WIDE SWINGS.
SO THAT'S WHY, AGAIN, WE, WE ALWAYS TALK ABOUT BEING CONSERVATIVE, BUT AGAIN, THIS CHART IS THE BEST REPRESENTATION FOR THE CITY OF WHAT THAT MEANS.
AND WE SHOULD ALWAYS, YOU KNOW, TAKE A LOOK AT THIS SO THAT WE ARE REMINDED FOR FUTURE, NOT TO REPEAT, YOU KNOW, PAST BEHAVIORS, BUT ALSO UNDERSTAND THAT, YOU KNOW, SALES TAX CAN GROW.
YOU CAN SEE WHERE WE WERE 461 MILLION IN, IN, UH, 2007, AND NOW WE'RE UP TO 944 MILLION.
SO IT IS A SIGNIFICANT REVENUE SOURCE, AND WE SHOULD RECOGNIZE THAT, YOU KNOW, THERE WILL BE SOME GROWTH, BUT WE SHOULD ALWAYS BE REMINDED TO WATCH WHAT'S HAPPENING AROUND US AND TO BE, BE PREPARED TO PIVOT.
AGAIN, AND THIS IS JUST, UH, TO KIND OF WHAT WE TALKED ABOUT.
UH, WE ALSO LOOK AT, UH, SOME OF THE ECONOMISTS.
THIS ONE'S PARTICULARLY FROM THE U OF H.
UM, SO WE GET A REPORT, FINANCE GETS A REPORT FROM THEM, TYPICALLY IN THE SPRING AND IN THE FALL.
SO THIS WAS BASED ON THE SPRING.
SO WE WERE, WE WERE LOOKING AT THAT AND SOME OF THE THINGS THAT WE'RE WARNING ABOUT, UM, AND THE ECONOMIC HEADWINDS, THE IMPACT THAT IMMIGRATION, UH, ENFORCEMENT COULD HAVE ON HOUSTON, THE IMPACT OF TARIFFS, UM, SOME OF THE SHIFTS IN THE ENERGY POLICY.
SO THEY LOOK AT ALL THOSE THINGS WHEN THEY WORK ON THEIR PROJECTION.
UM, AND SO THAT IMPACT HOW THEY WERE LOOKING AT EMPLOYMENT GROWTH, UM, AND THE POTENTIAL THAT THAT MAY NOT GROW AS AS MUCH.
AND THEN THEY WERE ALSO, AGAIN, DURING THAT TIME, WE WERE PREPARING FOR THE WORLD CUP.
AND SO THAT'S KIND OF BUILT INTO THE, THE, THEIR ANALYSIS.
AND WE SHOULD RECEIVE, LIKE I SAID, UH, THIS MONTH, THE JULY SALES TAX RECEIPT, WHICH SHOULD INCLUDE SOME OF THE IMPACT, UH, FROM THE WORLD CUP.
BUT ESSENTIALLY WE, WE LOOK AT, UH, YOU KNOW, THIS REPORT KIND OF AS A GUIDE, BUT WE DO OUR OWN INTERNAL MODEL, WHICH YOU'LL SEE ON THE NEXT PAGE.
SO INTERNALLY, WE, WE HAVE OUR OWN MODEL, UH, WHERE WE LOOK AT, YOU KNOW, CPI, WE LOOK AT EMPLOYMENT, UH, WE LOOK AT OIL PRICES, UH, TO, UH, COME UP WITH A CONSERVATIVE, A BASE AND OPTIMISTIC, UH, PROJECTION.
AND AS YOU CAN SEE, FOR THE PAST FEW YEARS, WE'VE BEEN VERY, VERY CLOSE, UH, WITH OUR PROJECTIONS ABOUT 0.1% FOR 24 AND 25 AND 0.4% IN 26.
AND THEN FOR FY 27, WITH THE, THE MONTHLY REPORT I JUST GAVE, WE ARE USING OUR CONSERVATIVE PROJECTION AS OUR SALES TAX NUMBER, WHICH IS 9 37 0.7 MILLION.
AND I DO WANT TO GIVE CREDIT TO TRE WHO WORKS WITH ME IN THE CONTROLLER'S OFFICE.
UH, SHE DOES ALL OF OUR, OUR SALES TAX PROTECTION AND SHE IS PHENOMENAL.
SO, AGAIN, UH, I, I JUST THOUGHT THIS WAS A GOOD REMINDER FOR US, ESPECIALLY WE'RE, WE'RE IN HURRICANE SEASON.
WE, WE HAD SOME MAJOR EVENTS JUST TO, UH, REITERATE, UH, THE VOLATILITY OF SALES TAX, WHAT IT MEANS THAT WE'RE NOT MAKING, YOU KNOW, RECURRING DECISIONS
[01:20:01]
ON SOME OF THESE BUMPS WE SEE IN SALES TAX.AND THAT WE ALSO NEED TO BE REMINDED THAT IN THE TERM, YOU KNOW, IN TIMES WHEN THE ECONOMY CAN SHIFT, WE NEED TO BE PREPARED, BE PREPARED AS A CITY, UM, TO SHIFT WITH IT.
UM, AND THAT CONCLUDES MY REPORT.
COUNCIL MEMBER FLICKINGER, MAYBE THAT WAS FROM THE LAST TIME.
COUNCIL MEMBER COUNCIL POLLARD.
THANK YOU, UH, FOR YOUR PRESENTATION.
UM, ARE THERE CERTAIN ITEMS THAT ARE NOT DESIGNATED, UH, FOR SALES TAX THAT WE BUY WITHIN THE CITY? UM, I WOULD HAVE TO LOOK AND SEE THERE, THERE MAY BE, 'CAUSE I KNOW LIKE, YOU KNOW, CARS HAVE A SEPARATE THING.
AND THEN OF COURSE, FOOD AND BEVERAGE, WE GET THE FOOD AND BEVERAGE MIXED TEXT.
UM, BUT I WOULD HAVE TO LOOK AND SEE IF THERE ARE ANY LIKE, SPECIFIC OTHER ITEMS BEYOND THOSE.
UM, AND THEN HAVE WE GOTTEN ANY SALES TAX PROJECTIONS OR NUMBERS REGARDING THE WORLD CUP THAT YOU KNOW OF? UM, NO.
SO LIKE I SAID, WE, WE ALREADY RECEIVED JUNE SALES TAX RECEIPT, WHICH INCLUDED, UM, THE IMPACT FROM THE WORLD CUP.
UM, I COULDN'T TELL YOU EXACTLY WHAT PORTION OF THAT IS TIED TO THE WORLD CUP, BUT WE KNOW THAT IT WAS, UH, HIGHER THAN WHAT IT WAS, YOU KNOW, PREVIOUS YEAR.
AGAIN, WE DON'T BUILD IT INTO OUR PROJECTION, SO WHATEVER IT IT IS, WE JUST LET IT FLOW.
SO, WE'LL AGAIN, FOR SEPTEMBER, WE'RE GONNA RECEIVE JULY, WHICH WILL HAVE ALSO A PORTION OF THE WORLD CUP, UM, THAT JUST KIND OF BAKED IN THE OVERALL.
UM, BUT I COULDN'T TELL YOU EXACTLY, YOU KNOW, OF THE HOWEVER MANY MILLION WE GOT THAT MONTH.
YOU KNOW, THIS PERCENTAGE WAS TIED TO THE WORLD CUP.
WHAT TYPE OF BUMP WAS IT? DO YOU RECALL? I WANNA SAY IT WAS A 7% LAST MONTH.
I, I'M THINKING ABOUT THE PREVIOUS PRESENTATION ABOUT THE WOODLANDS AGREEMENT AND MAYBE DIRECTOR JONES CAN, UM, UM, OFFER REMARKS TOO.
UM, 2018, I'M THINKING ABOUT WHY THE PROJECTS WEREN'T POSSIBLY MOVING FORWARD, BUT THEN I THOUGHT ABOUT HURRICANE HARVEY.
WHEN YOU'RE GOING THROUGH YOUR PRESENTATION OF, YOU KNOW, EVENTS THAT HAPPENED THAT FORCED US TO SHIFT IN, IN 2018, MOST OF THE CITY'S, UH, GENERAL FUND, THE, THE MATCHING DOLLARS WOULDN'T HAVE BEEN AVAILABLE 'CAUSE WE WERE IN THE THROES OF RECOVERY.
AND SO I'M THINKING ABOUT THE DELAY OF, UH, DR 17 FUNDING THE GENERAL FUND DOLLARS THAT HAD TO BE USED TO START RECOVERY.
UM, WHY THAT WOULD BE A REASON WHY THAT WE DIDN'T SEE MUCH ACTIVITY ON THAT FUND, UM, WHEN YOU'RE STRAPPED FOR GENERAL FUND DOLLARS DURING, UH, A, A DISASTER OR ANY TYPE OF EVENT.
AND SO I KEEP, I'M LIKE, 'CAUSE WHY WOULDN'T WE? BUT 2018 WAS SIGNIFICANT IN TERMS OF THAT WE WERE REALLY STRAPPED.
NO, THAT, THAT IS AN EXCELLENT POINT.
AND I DIDN'T THINK ABOUT THAT WHEN THE QUESTION CAME UP BECAUSE, UH, AS A RESULT OF HARVEY, THE ENTIRE CIP WAS KIND OF TURNED UPSIDE DOWN FOR SEVERAL YEARS.
UM, SO I WOULD ABSOLUTELY THINK THAT THAT WOULD'VE PLAYED A PART.
UM, AND THEN MAYBE AFTER, YOU KNOW, THAT KIND OF CALMED DOWN.
IT WAS JUST PEOPLE, IT WAS KIND OF LOST IN THE SHUFFLE MAYBE.
UH, BUT THAT IS AN EXCELLENT POINT AND I BELIEVE THAT WOULD DEFINITELY HAVE AN IMPACT.
YEAH, I'M SURE THAT WAS A BIG, YEAH, BECAUSE REMEMBER WE JUST SHOVED THE WHOLE CIP BACK, RIGHT? ARE YOU DONE? I'M DONE.
UM, WELL ON, REMIND ME WHAT WAS ALL DECIDED BY THE BIG, YOU KNOW, AMAZONS OF THE WORLD AND EVERYBODY, THE E-COMMERCE ON SALES TAX, HOW, HOW DOES ALL THAT WORK? SO FOR AMAZON AND THE BIG MARKETPLACE, UH, UH, YOU KNOW, LIKE, UH, ETSY AND ALL OF WAYFAIR, THEY FOLLOW THE SAME, UH, RULES.
SO IT'S, UH, THE 8.25%, THEY STILL, THE CITY STILL GETS THE FULL 1% ON THOSE.
UH, I BELIEVE THE RULE WAS LIKE, IF YOU HAVE LIKE A PRESENCE IN THE CITY OR UH, UM, FOR THOSE ONLINE PLACES FOR THE BUILDING AND THE SHIP TO, TO THE CITY, WE WILL STILL COLLECT THOSE SALES TAX AT THE SAME RATE.
NOW, THERE'S A DIFFERENT RULE FOR THOSE, UH, OUT OF STATE IF YOU BUY SOMETHING AND IT'S SHIPPED, THERE'S A DIFFERENT CALCULATION THAT THEY APPLY.
I DON'T REMEMBER EXACTLY OFF THE TOP OF MY HEAD, BUT IT, YEAH, IF YOU, IF YOU HAVE SOMETHING, I'D LIKE TO SEE THAT.
AND I HAD, I, I'M ALL, YOU KNOW, YOU BOUGHT EVERYBODY'S BUYING IN HOUSTON'S BUYING ONLINE STUFF, BUT WHO KNOWS WHERE ALL THAT SACK SALES TAX COMPANY IS FROM, BUT THE MARKET PLACE, THE AMAZONS, THEY OPERATE EXACTLY THE SAME AS IF YOU WERE TO WALK INTO A STORE, RIGHT? I KNOW THEY COLLECT SALES TAXES.
IT'S JUST THAT I WANNA KNOW THAT IT'S, I DO HAVE IT.
I JUST, I, I DIDN'T GO INTO LEVEL, I, I KIND OF TOOK THE SLIDE OUT, BUT I DO HAVE SOME DETAILS ON IT.
SO I CAN ABSOLUTELY SHARE THAT.
OKAY, THAT'D BE GREAT TO HAVE ANY ADDITIONAL QUESTIONS, COLLEAGUES ON THE SALES TAX PRESENTATION.
UH, AND THIS IS GOOD TO HAVE IN ONE PLACE.
I APPRECIATE, UM, THE INFORMATION IN THERE AND OR ANY PUBLIC SPEAKERS ABOUT THE SALES TAX PRESENTATION.
[01:25:06]
JUST A QUICK COMMENT.UH, IN LOOKING AT THE 20 YEAR HISTORY OF THE SALES TAX COLLECTIONS, IT DOUBLED DURING THAT PERIOD OF TIME, UH, THE THOUGHT OCCURRED TO ME.
IT'D BE REALLY INTERESTING TO SEE THOSE FIGURES INFLATION ADJUSTED, BECAUSE I WOULD IMAGINE PROBABLY IT WOULD BE CLOSE TO FLAT OVER THE 20 YEAR PERIOD.
SO IT WAS JUST A THOUGHT THAT OCCURRED TO ME.
ALRIGHT, COLLEAGUES, WE ARE TO OUR FINAL PRESENTATION, UM, FROM THE CONTROLLER'S OFFICE AUDIT DIVISION.
I PROMISE TO KEEP THIS BRIEF AS BRIEF AS I CAN, ALTHOUGH IT'S THE MOST IMPORTANT THING THAT I HAVE GOING ON.
SO EVERYBODY LOCK IN ONE OF THESE MEETINGS.
WE'RE GONNA PUT YOU AT THE TOP, I PROMISE.
MAD, UH, GOOD MORNING, MADAM CHAIR, MEMBERS OF THE BFA COMMITTEE.
THE FISCAL YEAR 2026, ENTERPRISE RISK ASSESSMENT AND THE FISCAL YEAR 2027 ANNUAL AUDIT PLAN.
UH, YOU CAN GO TO THE NEXT SLIDE.
LET'S START WITH WHAT CHANGED IN PRIOR YEARS.
WE ASSESSED RISK, RISK ONE DEPARTMENT AT A TIME, 24 SEPARATE PICTURES AND 24 DIFFERENT VOCABULARIES WITH NO WAY TO COMPARE THEM.
ONE SURVEY INSTRUMENT WE USE, ONE SURVEY INSTRUMENT, ONE SCORING MODEL APPLIED TO EVERY RESPONSE ACROSS 12 FACILITATED WORKSHOPS.
25 BUSINESS AREAS WERE SOLICITED.
SO THAT'S 23 DEPARTMENTS PLUS THE MAYOR'S OFFICE AND CITY COUNCIL 24 PARTICIPATED RESULTING IN 258 RISK SCORED.
IT IS THE FIRST CITYWIDE VIEW OF THE RISKS TO THE CITY THAT THE CITY HAS EVER HAD.
A CAUTION, I'D RATHER, I WANNA STATE VERY PLAINLY AS YOU'RE REVIEWING THE AUDIT REPORT ITSELF, UM, THESE RISKS WERE IDENTIFIED AND RATED BY THE DEPARTMENTS THAT OWN THEM.
OKAY? THIS IS NOT THE RESULT OF MY OPINION.
THIS IS THE ACTUAL DIRECTORS ACTUAL PEOPLE THAT OWN THESE AREAS WE'RE RATING THEM.
WE, ALL MY TEAM DID IN ACCORD WITH EY WAS WE STANDARDIZED THE INSTRUMENT AND APPLIED THE SCORING CONSISTENTLY.
WE DID NOT INDEPENDENTLY TEST THE CONTROLS OR THE MITIGATING ACTIVITIES THAT THE DEPARTMENTS NAMED OR TOLD US THAT THEY HAVE.
THIS IS CONSIDERED OUR PLANNING TOOL, AND WHAT IT DOES IS IT TELLS US WHERE TO AUDIT.
UM, ON THE NEXT SLIDE, YOU'LL SEE FIVE THEME THEMES APPEARED.
TECHNOLOGY, RELIABILITY, AND CYBERSECURITY AT THE TOP WITH 43 RISKS ACROSS THE CITY.
WORKFORCE CAPACITY AT 38, GOVERNANCE RECORDS AND PUBLIC TRUST AT 33, OPERATIONAL EXECUTION AT 27, AND FISCAL CAPACITY AT 27.
THE NUMBER THAT FRAMES ALL OF THIS IS THAT 129 OF THE 258 RISKS ARE OPERATIONAL RELATED, EXACTLY HALF DEPARTMENTS.
WHAT WE FOUND WAS THAT DEPARTMENTS AREN'T UNCERTAIN ABOUT WHERE THE CITY IS GOING.
THEY'RE UNCERTAIN WHETHER THEY CAN GET THERE WITH THE PEOPLE'S, THE PEOPLE, THE SYSTEMS, AND THE EQUIPMENT THAT THEY HAVE AT HAND.
ONE LIMITATION I WANNA GIVE YOU IS THERE IS NO COMPARABLE, UM, BECAUSE IT'S THE FIRST YEAR, WE CAN'T GIVE YOU A BASELINE TO, TO COMPARE AGAINST LAST YEAR, BUT WE WILL BE ABLE TO DO THAT GOING FORWARD.
ON THE NEXT SLIDE, YOU'RE, UM, I THINK THIS IS THE SLIDE THAT MATTERS THE MOST.
THE STORY THAT WAS TOLD FROM THIS PROJECT IS THAT INDIVIDUALLY, SEVERAL OF THESE RISKS LOOK MANAGEABLE.
TOGETHER, THEY DESCRIBE AN ORGANIZATION SPENDING MOST OF ITS CAPACITY, HOLDING CURRENT OPERATIONS IN PLACE, CONSTRAINED FUNDING AND STAFFING, DELAYED TECHNOLOGY REFRESH, DELAYED REFRESH, RE WEAKENED, CYBERSECURITY.
THE SAME CONSTRAINTS EXTEND DEFERRED MAINTENANCE AND SLOW PROCUREMENT.
AND SLOW PROCUREMENT MAKES THE FIRST THREE HARDER TO FIX EACH PRESSURE MAKES THE NEXT ONE HARDER TO RELIEVE.
THAT'S WHY WE DIDN'T RANK THE 250 RISKS AND AUDIT THE TOP 10.
AUDITING A SYMPTOM IN ONE DEPARTMENT WON'T MOVE, MOVE A CONDITION APPEARING IN THE OTHER 23.
ON THE NEXT SLIDE, WE HAD TWO SETS OF RISKS THAT SET OUTSIDE THESE FIVE THEMES THAT WE'VE DISCUSSED, AND THEY'RE THE CLEAREST ARGUMENT FOR DOING FOR WHY WE, WE CHANGED OUR METHODOLOGY.
PROCUREMENT 21 RISKS REPORTED UNDER THREE DIFFERENT CATEGORIES.
11 IS OPERATIONAL DE DELAYS, SIX AS VENDOR COSTS.
FOUR IS CONTRACTING COMPLIANCE.
NO SINGLE DEPARTMENT REPORTED ENOUGH
[01:30:01]
OF ANYONE TO LOOK LIKE A PATTERN BUT CONSOLIDATED.IT'S AMONGST THE LARGEST CONCENTRATIONS IN THE ENTIRE ASSESSMENT.
A DEPARTMENT BY DEPARTMENT REVIEW CANNOT SEE THIS, BUT THE OVERARCHING, UH, MESSAGE WAS THERE.
THE SECOND AREA WE SAW THIS WAS IN THE ASSET LIFECYCLE, WHICH CONTAINED 13 RISKS, AGING FACILITIES, FLEET EQUIPMENT, DEFERRED MAINTENANCE.
THESE BELONG WITH CAPITAL PLANNING RATHER WITHIN ANY, WITHIN ANY ONE AUDIT THEME, ANY ONE PARTICULAR RISK.
IT WAS DESCRIBED AS INVESTMENT POSTPONED RATHER THAN AVOIDED.
AND THE COST COMPOUNDS WHILE IT'S SITTING THERE WAITING.
UM, ON THE NEXT COUPLE SLIDES THAT WE'RE GONNA GET INTO THE AUDIT PLAN, AS YOU ALL ARE VERY AWARE, THE E THE ENTERPRISE RISK ASSESSMENT, SIGNIFICANT EVENTS THROUGHOUT THE CITY IN THE LAST FISCAL YEAR, THE MEDIA, THE HOUSTONIANS, YOU ALL ALL CONTRIBUTE TO OUR AUDIT PLAN.
UM, I'M NOT GONNA GO THROUGH THE NEXT COUPLE SLIDES.
I REPORT TO THE CITY CONTROLLER, UM, WHERE WE USE THE YELLOW BOOK AND THE RED BOOK.
WE HAVE A STANDARDIZED PROCESS THAT WE GO THROUGH.
YOU GUYS HAVE SEEN THIS ALL BEFORE.
ON SLIDE 10, THE PLAN CON, THE NEW PLAN CONTAINS 38 ENGAGEMENTS.
UM, I'M NOT GONNA READ THROUGH THEM, BUT I AM GONNA POINT OUT THAT THE ASTERISK ITEMS ARE NEW THIS YEAR AND MOST TRACED DIRECTLY TO THE ENTERPRISE RISK ASSESSMENT, AI GOVERNANCE, APPLICATION PORTFOLIO MANAGEMENT, FACILITY, MAINTENANCE RECORDS, RETENTION, PROCUREMENT CYCLE TIME, AND PURCHASE CARD PROGRAMS. TO BE CLEAR ABOUT WHAT THE 38 MEANS, IT IS A MULTI-YEAR POPULATION SEQUENCED.
HIGHEST EXPOSURE FIRST, NOT A COMMITMENT TO FINISH.
38 AUDITS IN 12 MONTHS WITH 11 STAFF, EMPHASIS ON 11 STAFF ON THE NEXT SLIDE.
15 ENGAGEMENTS ARE ALREADY UNDERWAY.
15 ENGAGEMENTS ARE ALREADY UNDERWAY AND TARGETED FOR FISCAL YEAR 2027 COMPLETION.
WE'VE GOT FIVE IN REPORTING, INCLUDING CIVILIAN OVERTIME.
UM, FOUR IN FIELD WORK, UM, INCLUDING UNIFORMED OVERTIME WITH FIRE AND POLICE.
AND THEN, UM, QUITE A FEW IN PRE-PLANNING WITH ONE ON HOLD THAT WE'VE RECENTLY PULLED OFF OF HOLD AND PUT BACK IN PLANNING, WHICH IS THE, UM, SAP SEGREGATION OF DUTIES.
ON THE NEXT SLIDE, YOU'LL NOTICE THE SAME NINE ENGAGEMENTS THAT WE RUN EVERY YEAR, REGARDLESS OF THE PLAN, ETHICS, FRAUD HOTLINE, PRIOR AUDIT, FOLLOW UPS, QUALITY CONTROL RISK ASSESSMENTS, THE LIAISON PROGRAM, UM, AND SPECIAL PROJECTS.
IN CONCLUSION, THE AS ASSESS THIS ASSESSMENT DESCRIBES THE CITY WHOSE PRINCIPAL EXPOSURE IS EXECUTION CAPACITY, THE PLAN POINTS, INDEPENDENCE ASSURANCE AT THAT, WHERE IT CONCENTRATES IN A SINGLE DEPARTMENT, AND ALSO WHERE IT REOCCURS ACROSS MANY THANK YOU.
AND IF YOU HAVE ANY QUESTIONS, I'LL TAKE THEM AT THIS TIME.
THANK YOU AND THANKS FOR GETTING RIGHT TO THE MEAT OF IT.
COUNCIL MEMBER POLLARD, THANK YOU CHAIR, AND THANK YOU FOR YOUR PRESENTATION.
I THINK ON PAGE THREE, YOU SHOW THAT, UH, YOU'RE LIKE 25, I GUESS OVERALL DEPARTMENTS AND 24 PARTICIPATED, WHICH WAS THE ONE THAT DID NOT SOLID WASTE.
UM, THANK YOU FOR THE PRESENTATION.
SO HOW I, I KNOW THAT A LOT OF THESE AUDITS TAKE MULTIPLE YEARS AND WE DON'T EXPECT ALL OF THEM TO BE DONE EVERY YEAR, LIKE YOU SAID.
UM, HOW MANY DO YOU EXPECT TO BE COMPLETED IN FY 27? SO AT THIS PACE, WE'RE ON GOAL FOR 1.5 AUDITS PER AUDITOR, WHICH WE'RE, WHICH HOPEFULLY SHOULD RESULT.
UM, AN ALL OF THIS ASSUMES THAT THE DEPARTMENTS, UH, PARTICIPATE ACTIVELY, THEY RESPOND QUICKLY AND SWIFTLY WOULD RESULT IN APPROXIMATELY 20 TO 24 A MIX, RIGHT? BUT IT DOES INCLUDE ENGAGEMENT SUCH AS THIS ONE.
UM, CREATING THE AUDIT PLAN IS AN ENGAGEMENT FOR US.
IT INCLUDES FOLLOW UPS ON PRIOR AUDITS.
UM, SO THERE'S SOME, WE HAVE LEVELS TO THIS COMMITMENT, RIGHT? UM, THAT ALSO WOULD MEAN THAT WE RECENTLY IMPLEMENTED OUR, UM, AN AUDIT SOFTWARE.
AUDIT BOARD, IT'S TRO UM, GETTING THAT FULLY OPERATIONAL.
AND THEN AGAIN, I CAN'T EMPHASIZE THIS ENOUGH, WE ARE ONLY AS QUICK AND WE ARE ONLY AS GOOD AS THE AUDITEE'S ABILITY TO RESPOND.
SO WHEN WE HAVE AUDITS PUT ON HOLD, IT REALLY DOES MESS UP THE PIPELINE WITHIN THE DEPARTMENT.
SO YOU SAID 20 TO 24, IS THAT IN? SO IN FY 26, I THINK THAT THERE WERE FIVE FOLLOW UP AUDITS.
AND THEN HOW MANY JUST REGULAR AUDITS PAST THAT WERE DONE? SO, UM, I BELIEVE THERE WERE FOUR THREE FOLLOW, UH, THREE REGULAR AUDITS.
[01:35:02]
YEAH.FOUR AUDIT, THERE WERE FOUR REGULAR AUDITS, UM, THAT WE RELEASED IN FY 26.
UM, BUT AGAIN, WE ARE REVISING THE ENTIRE INTERNAL PROCESS, RIGHT? UM, WE'VE BALLOON, WE BALLOONED UP AT ONE POINT TO 14 STAFF, WE'RE DOWN TO 11 AND IT'S JUST A CAPACITY ISSUE.
UM, THE OTHER THING IS, IS THAT AS WE HAVE BROUGHT, AS WE, AS WE PROGRESSED THE AUDIT FUNCTION ITSELF INTO THE MORE, THE 21ST CENTURY, THERE'S SOME EFFICIENCIES THAT SHOULD START REVEALING THEMSELVES INTERNALLY.
AND THEN I THINK AS THESE PRESENTATIONS HAP OCCUR MORE, WE SHOULD GET BETTER PARTICIPATION FROM THE CITY DEPARTMENTS AS WELL.
UM, IN FY 27, SO THERE'S 38 ENGAGEMENTS, 14 OF WHICH ARE NEW.
OF THE 14, HOW MANY CAME FROM THE RISK ASSESSMENT? UM, AND THEN ARE THERE ANY OF THE 24 THAT YOU'RE MAYBE GONNA PUT ON PAUSE TO ELEVATE SOME THAT CAME FROM THE RISK ASSESSMENT? UM, SO WE DON'T QUITE LOOK AT IT LIKE THAT.
THE HOW MANY CAME FROM THE RISK ASSESSMENT? I WOULD HAVE TO GO BACK THROUGH THE REPORT TO TELL YOU.
I, MY, IF MEMORY SERVES ME, I BELIEVE THERE'S APPROXIMATELY 10, BUT THAT'S A GUESS AT BEST.
UM, BUT IN THE REPORT WE DO STATE WHERE THERE, WHERE IT IS COMING FROM FISCAL YEAR 26, ERA, THERE'S ALSO UPDATES TO THE AUDIT PLAN WHERE WE'RE STATING LIKE CYBERSECURITY HAS BEEN A HOP A TOP RISK NO MATTER HOW WE SLICE AND DICE THE ERA.
AND SO WE SAY THAT IN THE, IN THE REPORT.
UM, HOW WE LOOK AT THE PRIORITIZATION IS WE'RE TRYING TO, WE TRY OUR BEST TO GET THROUGH THE PIPELINE.
WE DON'T TYPICALLY LIKE FOR AUDITS TO JUMP AHEAD SIMPLY BECAUSE WE'VE GOT DEPARTMENTS THAT ARE INVESTED IN GETTING THOSE COMPLETED.
WE ALSO WORK WITH THE DEPARTMENTS ON THEIR TIMELINE.
SO WE DON'T WANT A SITUATION WHERE SOMETHING IS AN AI SITUATION IS SO IMPORTANT.
AND NOW I'VE GOT AN HR DEPARTMENT THAT'S PUT IN HOURS AND WE'RE ALMOST DONE, BUT I TAKE THAT STAFF AWAY.
SO WHAT WE DO IS WE, IS WE FILL 'EM IN.
SO AS AUDITS GO INTO REPORTING, THOSE SAME TEAMS ARE SIMULTANEOUSLY WORKING IN THE BACKGROUND ON PRE-PLANNING.
PRE-PLANNING HAPPENS BEFORE THE DEPARTMENT EVEN KNOWS WE'RE COMING.
UM, AND SO THAT ROTATION IS WHERE WE'RE GETTING INTO.
I'D LIKE TO REMIND CITY COUNCIL THAT WE HAVE TWO MANAGERS, SO THERE'S THREE OF US THAT ARE REVIEWING THE WORK OF ALL OF THIS.
AND A LOT OF TIMES THAT CAN CAUSE A STOP, UH, CREATE A, A BACKLOG IF YOU WILL.
UM, AS WE ARE ACTIVELY HIRING, WE'RE ACTIVELY TRYING TO GET THAT BACKLOG THROUGH.
BUT TYPICALLY HOW, HOW WE WOULD LOOK PICK.
THE NEXT ONE IS WE'RE GOING TO EVALUATE ALL 38, LOOK AT WHAT'S GOING ON AROUND US AND THEN GO FROM THERE.
WE ALSO ARE IN CONSIDERATION OF WHO WE'RE AUDITING CURRENTLY.
SO WHEN IT COMES TO PEOPLE LIKE HITS, EVERY AUDIT HAS A HITS ELEMENT.
IF THE AUDIT HAS AN APPLICATION OR SYSTEM INVOLVED, WE'RE ALSO AUDITING A PIECE OF HITS.
SO WE'RE GONNA BE A LITTLE BIT CAREFUL WHEN WE PICK AN AUDIT THAT'S HITS FOCUSED BECAUSE WE UNDERSTAND THE BURDEN OF AN, OF AN AUDIT.
WE'RE VERY CAREFUL RIGHT NOW WITH A RA PAYROLL HAS FOUR AUDITS ON MY LIST.
THEY'VE BEEN ON MY LIST FOR TWO, THREE YEARS.
SO THE NEXT A RA AUDIT, IF THAT WERE WHAT WE WERE SELECT, WE'D TRY TO STAY AWAY FROM THAT DEPARTMENT.
VICE MAYOR, VICE CHAIR,
SO ON SLIDE 13, I JUST WANT TO CONFIRM THE SAP AUDIT, IT SAYS ON HOLD, BUT IT'S NOT ON HOLD.
SO I KNEW YOU WOULD ASK ABOUT THAT
SO KIND OF WHAT'S HAPPENED THERE.
THIS IS AN EXAMPLE OF WHEN OF HOW ESPECIALLY HITS WHO ARE THE GATEKEEPERS OF CONTROLS AS WELL CAN WORK WITH THE AUDIT DEPARTMENT.
SO IN THIS PARTICULAR INSTANCE, WHEN WE SENT NOTICE, WE SAID THAT WE WERE GONNA LOOK AT THE SEGREGATION OF DUTIES WITHIN SAP, SPECIFICALLY THE INVOICING PROCESS.
WHAT WE REALIZED WAS THAT WE HAVE ALL THESE PAYROLL AUDITS WHERE WE'RE ALSO LOOKING AT THE SEGREGATION OF DUTIES.
SO WHEN IT, BECAUSE THE SOD AS IS A YOU, YOU, YOU AUDIT IT IN PIECES, WE DETERMINE THAT, HEY, THE BEST THING WOULD BE TO AUDIT THE OVERARCHING SEGREGATION OF DUTIES PROCESS WITH HITS.
AND THEN THE PIECE OF THE PIE WE'RE GONNA LOOK AT IS PAYROLL, WHICH LETS US LEVERAGE THE, THE WORK THAT WE'VE DONE FOR THE OTHER AUDITS.
IT ALSO FREES UP SOME OF THE HITS TIME AND THEN ALSO LETS US TRUE UP OUR AUDIT PLAN SO THAT THE RESPONSE TIME AND, AND HOW WE WORK WITH THEM FOR THE INVOICING PROCESS, PROCUREMENT PROCESS, ALL THOSE DIFFERENT MODULES WILL GO SMOOTHER WITH THEIR AUDIT PROCESS.
AND SO THAT WORKING WITH THE NEW INTERIM DIRECTOR IS HOW WE PULL THAT ONE OFF HOLD.
I THINK THAT'S A SMART APPROACH JUST GIVEN HOW BIG, UH, THAT AND, AND EERP AUDIT WOULD BE.
AND FOCUSING WITH PLUS LEVERAGING, YOU KNOW, WORK THAT'S ALREADY BEING DONE.
UM, THERE WAS A AI ITEM ON THE LIST AS WELL.
WILL THAT COINCIDE AFTER BECAUSE IT IS WORKING ON A MORE ROBUST GOVERNANCE POLICY FOR AI.
[01:40:01]
THIS GOING TO HAPPEN AFTER THAT POLICY IS COMPLETED? I THINK IT'S A, THAT IS DEFINITELY A DISCUSSION WITH THE INTERIM DIRECTOR.UM, AND WE'VE HAD THIS DISCUSSION JUST LAST WEEK, RIGHT? THERE'S A VALUE TO MY FUNCTION COMING IN BEFORE THE POLICY COMES OUT, RIGHT? UM, OUR ABILITY TO GIVE GUIDANCE FROM A MORE OF A CONSULTANT PERSPECTIVE, UM, IS HOW THAT THAT LINE ITEM COULD BE USED.
UM, WE AS AUDITORS, ONE OF THE NUMBER ONE THINGS THAT THE AUDIT COMMUNITY IS CONCERNED WITH IS AI.
AND A LOT OF IT, A LOT OF THE CONCERN COMES WITH LATE ADOPTERS, WHICH FORCES PEOPLE TO USE WHAT THEY WOULD CALL SHADOW AI.
SO IN TALKING WITH THE INTERIM DIRECTOR, THERE IS A CONVERSATION AROUND, SHOULD WE COME IN FIRST BEFORE YOU FINALIZE YOUR POLICY? SHOULD WE COME IN AFTER THE POLICY IS FINALIZED? UM, I WOULD PREFER IN THIS PARTICULAR INSTANCE, BECAUSE IT IS GOING TO BE A MOVING TARGET, MEANING THE CITY AND EVERY OTHER ENTITY IN THIS WORLD IS GOING TO CHASE THAT AI RABBIT THAT WE CAME IN BEFORE AND WE'RE MORE OF A CONSULTATION.
UM, WE HAVE AT OUR DISPOSAL THE POLICIES ACROSS SEVERAL CITIES, SEVERAL GOVERNMENTS.
WE ALSO HAVE AUDIT AT OUR DISPOSAL HOW WE WOULD AUDIT THAT.
RIGHT? AND THEN THE, THE IMPACT THAT IT CAN HAVE TO TECHNOLOGICAL USE, CLOUD, CLOUD, CLOUD GOVERNANCE, THE IMPACT IT CAN HAVE TO THE FINANCIAL STATEMENTS, THE IMPACT IT CAN HAVE TO SAP FOUR HANA.
WE'VE SEEN ALL OF THOSE AUDITS BEING PERFORMED AND WE'VE BEEN TRAINED ON THAT.
AND THE OTHER, I HAVE ONE, THE OTHER CONSIDERATION THERE IS THE CO-PILOT PILOT THAT'S BEING RUN.
AND IF THAT MOVES BEYOND PILOT PHASE AND IS EXPANDED, YOU KNOW, THERE, THERE, THAT WOULD BE THE, THE, THE LLM THAT PEOPLE USE, RIGHT? YES.
THERE WOULDN'T BE ANY OTHERS THAT ARE BEING USED THAT ARE APPROVED.
SO THAT WOULD LIMIT THE ABILITY, YOU KNOW, FOR FOLKS TO BE USING OTHER THINGS OFF TO THE SIDE.
UM, BECAUSE THEY WOULD ALL HAVE ACCESS TO COPILOT 365 AND THAT BEEFS UP SOME OF THE SECURITY, UM, AND SOME OF THE CONCERNS THAT ARE OUT THERE WITH WHAT PEOPLE ARE PUTTING INTO OTHER SYSTEMS. YES.
AND TO, SO ALSO SUPPORTING US BEING MORE OF A CONSULTING ROLE AS I AM ONE THAT HAS A PILOT LICENSE IN PART SO THAT I CAN UNDERSTAND HOW WE'RE ROLLING IT OUT.
THE IMPACT THAT IT HAS, UM, ACROSS OTHER GOVERNMENTS AND ACROSS OTHER ENTITIES.
THE PILOT PROGRAM IS ONE OF THE MOST IMPORTANT.
IT'S IMPORTANT THAT YOU HAVE THE RIGHT USERS USING IT, RIGHT? A PILOT LICENSE IS NOT FOR REVISING YOUR EMAIL.
WE'RE TRYING TO BREAK THE SYSTEM AND, AND SEE HOW FAR WE CAN REACH AND, AND HOW FAR WE NEED TO REACH AND WHERE TO COME BACK.
AND SO, YOU KNOW, THAT THAT IS ONE OF THE REASONS WHY IN THE CONTROLLER'S OFFICE, THE CONTROLLER HIMSELF GAVE ME HIS PILOT LICENSE IN FACT SO THAT WE CAN THEN GIVE BETTER GUIDANCE ON, ON HOW TO IMPLEMENT.
AND YOU KNOW, WE LIKE SEEING THESE AUDITS COME TO BFA.
SO WHAT, WHEN AM I GONNA SEE ONE? WHEN'S THE, WHEN'S THE FIR WHICH ONE IS GONNA BE DONE SOON TO COME? YES.
SO NO PRESSURE TO MY TEAM, BUT NO PRESSURE OUT THERE.
UH, SO THE NEXT ONE WE HAVE UP FOR UP IS HR, THE HIRING POLICIES AND PROCEDURES.
WE'RE ACTIVELY WORKING THROUGH CIVILIAN OVERTIME.
UM, IN PARTICULAR, JUST SO WE'RE VERY CLEAR, ALL THREE OVERTIME AUDITS HAVE SOME COMMON OBJECTIVES IN, IN PLACE.
ONE OF THE OBJECTIVES THAT WE'RE VALIDATING IS THE BUDGETING PROCESS FROM THE PERSPECTIVE OF THE DIFFERENT DEPARTMENTS.
CIVILIAN OVERTIME IS ACTUALLY PRETTY COMPLETE, BUT BECAUSE WE HAVE HPD AND HFD, WE WANTED TO HIT FINANCIAL
ARE YOU CLOSE ON THE HR HIRING? YES.
WE'LL WE'LL BRING IT, WE'LL BRING IT TO ONE OF THE FUTURE BFAS COMING UP.
YOU AND YOUR TEAM DO A GREAT JOB.
REALLY APPRECIATE ALL OF YOUR GOOD WORK.
AND ARE THERE ANY PUBLIC SPEAKERS ABOUT THIS ITEM? DOUG SMITH IS GONNA HAVE SOMETHING TO SAY.
UH, THEIR LAST SLIDE SHOWED I THINK NINE UH, PROJECTS THAT THEY DO EVERY YEAR.
THE LAST ONE WAS SPECIAL PROJECTS AND I HAVE A SPECIAL PROJECT THAT I WOULD LIKE THEM TO CONSIDER.
UH, THE CONCESSIONAIRES AT THE AIRPORTS ARE LIMITED.
CAN'T REMEMBER THE EXACT PERCENTAGE, BUT THEY'RE LIMITED TO THE AMOUNT THEY CAN CHARGE AT THE AIRPORT ABOVE WHAT THEY CHARGE OUT IN THE STREET.
AND I DID MY OWN VERY LIMITED UH, AUDIT.
AND THERE ARE SOME, SHE'S WRITING IT DOWN.
LET'S MAKE SURE WE'RE NOT GETTING, GETTING GOUGED OUT THERE AT THE AIRPORT.
YEAH, THERE ARE SOME THAT APPLY, YOU KNOW, DO VERY WELL AND THERE ARE OTHERS THAT ARE EXCEEDING THAT LIMIT SOME BY QUITE A BIT FROM THE VERY LIMITED STUDY
[01:45:01]
I DID.IT WOULD BE NICE TO HAVE A STUDY DONE TO SEE HOW MUCH, REALLY, WHAT'S GOING ON.
NO, I THINK THAT'S, I PROBABLY HAS NEVER BEEN CHECKED OR MAYBE WE SPOT CHECK HAS OFFICIALLY CHECKED.
THANK YOU DOUG, AND THANKS FOR YOUR PARTICIPATION TODAY, COLLEAGUES.
I THAT IT BRINGS US TO THE END OF YOUR, THE AGENDA.
I REALLY APPRECIATE YOUR, UM, HANGING IN THERE WITH ME.
AND OUR NEXT MEETING WILL BE TUESDAY, SEPTEMBER 29TH AT 10:00 AM THIS MEETING'S ADJOURNED.