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 Soccer stadium
 Subprime & the city
 Iranian divestment
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      Soccer stadium debate needs clarity

City Controller Annise Parker wants clarity in discussing public funding of the proposed Dynamo soccer stadium.  

The city is attempting to acquire a six-block tract east of downtown through a combined purchase and land swap.  That tract may be offered to the Houston Dynamo as a site for their proposed stadium.  The city has previously participated in the downtown baseball and basketball venues so this is not unprecedented.  If the city does not complete a Dynamo deal, the tract would be held until a use is determined.

"My first concern is for the land acquisition.  While there has been public speculation about the use of the land, the request for council action identifies no specific public purpose.  That is backward public policy," the controller stated.  "The city is not in the land speculation business.  Council should know for what purpose the land will be used."   

Mayor Bill White favors using money from the Tax Increment Reinvestment Zone (TIRZ) located just east of downtown to cover the purchase of five of the six blocks. When a TIRZ is created the city agrees to return to the zone any growth in property taxes resulting from increased development. In turn, the TIRZ can borrow against those dollars for infrastructure improvements or use those dollars for enhanced street lights, sidewalks, landscaping and other public improvements.

"TIRZ dollars are property taxes. This is a legitimate use of TIRZ monies, but to say there will be no public dollars, or tax dollars, used for this purchase is simply inaccurate," she said.

The sixth block will be acquired through a land swap using water and sewer ratepayer dollars. "I am concerned about the use of public utility revenues to help make this deal possible. Our water and sewer customers should not be helping to subsidize a professional sports facility, no matter how much we want it," the controller said.


Mortgage mess affects debt, not investments

Unlike other municipalities and the nation's economy as a whole, the city's $2 billion investment portfolio has not been impacted by the collapse of the subprime mortgage industry. City investments are a slightly different story.

"We just aren't seeing the same problems as other cities," said City Controller Annise Parker. "Many cities rely solely on the ratings supplied by the bond rating agencies when purchasing investments. Our in-house investment staff is required to look beyond the ratings and conduct basic research before making investment decisions."

" We stick with what we know. As a result, we have avoided the questionable investments that have caused big losses for some other cities. This conservative and prudent approach ensures that taxpayer dollars are being invested effectively and efficiently."

DEBT

Even though City of Houston bonds are still considered a good investment and there have been no changes in the city's financial health, the mortgage crisis is having some impact on the city's cost of borrowing money. This is because the turmoil in the mortgage industry has rippled through many of the big financial firms and has put the bond insurance industry on the ropes.

The city will typically purchase insurance for its bond deals. This helps boost the overall bond ratings on these deals from the underlying 'A' or 'AA' to 'AAA', lowering the interest the city has to pay. The cost of that insurance is now much higher, thus boosting the city's overall borrowing costs each time it goes to market with a new bond deal.


City urged to cut financial ties to Iran

City Controller Annise Parker is urging the city's three pension funds to join others across the country in divesting themselves of any investments in Iran.

"The Treasury Division of the Controller's Office has reviewed the city's $2.3 billion investment portfolio and found we have no investments with any ties to Iran," she said.

In keeping with her previous request regarding investment in Sudan, she urges the Houston Municipal Employees Pension System, the Houston Police Officers Pension System and the Houston Firefighters Retirement and Relief Fund to conduct similar reviews and follow the lead of others who have already divested.


Financial system conversion delays CAFR

Departmental delays caused by the city's unexpectedly difficult transition to a new financial system will postpone the release of this year's financial report until at least April 30, City Controller Annise Parker has announced.

The FY07 CAFR (Comprehensive Annual Financial Report) was due December 31. Departments enter data on an ongoing basis then produce annual reconciliations, which are then routed through the Controller's Office for analysis and consolidation before going to Deloitte, the city's audit firm.

"I am both personally frustrated and professionally concerned by the problems. While the city's underlying financial situation is strong, our inability to make a smooth transition from the old legacy financial system to the new SAP system definitely has had an impact, particularly during a time of volatile financial markets," the controller said.

The FY06 report was produced during the transition to the new SAP system. Many employees put in double duty during this trying time, resulting in delays in that CAFR as well.

The FY07 CAFR is the first produced entirely on the new system. The controller said departments were overly optimistic in projecting how long it would take to train employees in the system and to scrub the converted data.

SAP PROMOTES HOUSTON

"Ironically, SAP has touted the city's conversion as one of its smoothest. The SAP system has performed as intended, but not always as anticipated. It has been a steep learning curve, which has escalated costs," she said.

In October, the controller estimated the CAFR would be released in late February. Because of continuing problems, the controller has asked the GFOA (Government Finance Officers Association) for a two-month extension, projecting an April 30 release.

SAP, the industry standard, can be modified up-front for clients or clients can change processes to customize the software. The city's transition team opted to change city processes. This involved about 2,000 employees who interact with the system. The controller noted that creating additional reports and data extraction has proven to be difficult and time-consuming.

"The biggest problem is converting data from the old system to SAP. This has resulted in significant delays as departments attempt to report accurate fixed assets. Data due last fall still has not been received," she said.

REMEDIES

Last fall, the Controller's Office began daily conference calls with the Financial and Administration Department and the software transition team to troubleshoot problems. The controller said she also began meeting with the F&A director and relevant departmental personnel to discuss progress and began delivering monthly departmental progress reports to City Council.