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APRIL 2004
May 15 election
Drainage plan
Street construction
Money Matters
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May 15 pension plan election
critical to city's financial health
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CITY MEETINGS
City Council
public session:
Tuesday 2 p.m.
(Call 713-2471840
to sign up to speak)
Business session
Wednesday 9 a.m.
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The upcoming city budget will be the toughest balancing act since the 1986 oil bust.
Fixed expenses will jump $156 million, but revenues are expected to climb only about $43 million. Like many cities, Houston faces steep increases in employee health insurance premiums - $26 million more next year. We’ll also pay $51 million more for contractural HPD raises.
Sales tax revenue (about 25% of the general fund budget) is finally beginning to inch up again after dropping or staying flat for two years. The recession even slowed property tax collections, which account for about 45% of the budget.
Then there’s the pension fund shortfall you may have read about. That will account for almost $58 million of the increase ($40 million for civilian employees, $17.8 million for HPD).
The pension fund crisis could affect the level of city services and has certainly precipitated a crisis in public confidence. Everywhere I go astonished voters ask how this happened and what the city’s going to do about it.
One immediate solution is the May 15 election. Houston voters will be asked to opt out of proposition 15, the state constitutional amendment that prevents cities from reducing or impairing any pension benefit already earned by a vested employee. If Proposition 15 is allowed to stand, the city will be limited in its ability to negotiate changes that could help reduce the unfunded pension liability. MORE
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Drainage proposal needs tweaking |
Mayor Bill White's solution to Houston's massive drainage problems is pragmatic but requires a bit of fine-tuning before City Council votes Wednesday.
Restructuring most of the existing $4 billion water and sewer debt is expected to yield $50 million a year for drainage improvements and $30 million for maintenance and operation. This restructuring takes advantage of both interest rates and cash accumulated in the system.
Mayor White's plan is similar to his predecessor's, but it differs in several important ways. White's plan relies on an immediate 9% water and sewer rate hike, automatic annual rate increases and federal funding after three years when the debt refinancing benefit dries up. Brown's 20-year plan was built on a drainage fee tied to the amount of a property's runoff as well as a lower initial rate hike. This plan shifts costs from property owners to water-sewer customers.
While I'm generally supportive of the mayor's proposal, I would offer several suggestions. (Note: These issues are being negotiated and may have changed by the time you read this.)
The mayor's plan would allow 8% of water and sewer revenues to be transferred to the general fund and used for drainage.
Whether you call this a franchise fee or simply a transfer to the general fund, this kind of permissible transfer could re-open the door to the Any Lawful Purpose Fund (ALP) which I fought so hard to close as a Council member. Over the years, mayors and councils siphoned off about $325 million from water and sewer revenues for other purposes, such as the Fire Department and the Clear Lake Library. The bond covenants themselves should restrict these funds to drainage. If not, Council needs to pass a separate ordinance specifying that the funds will only be used for drainage.
Water and sewer rate increases would be automatic.
The rates may not need to be increased as specified in the proposed bond covenant. City Council needs the authority - and advance notice - to prevent a rate increase if they determine it's not necessary.
The proposed water and sewer refinance package would create up to 35% exposure to variable interest rates.
The city has an internal policy of up to 20% exposure. I'm not opposed to a higher amount, but I believe a 25% cap provides both flexibility and reasonable security. Council needs to vote on a formal debt policy.
If these changes are made, the drainage plan should pass Council overwhelmingly. For more information about the city's storm water management program, see: www.swmp.org.
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If you have trouble reading this newsletter, you may also read it online at: www.ci.houston.tx.us/ citygovt/controller
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Road work audit cites city, METRO |
The city and METRO, not private contractors, are largely responsible for those never-ending street construction projects that miss deadline after deadline.
The eye-opening report was announced earlier this week by Mayor Bill White and City Controller Annise Parker, whose office was asked to investigate street project delays in an unprecedented performance audit.
“We expected to find that contractors were to blame for most project delays," Parker said. "However, according to our review, a lack of adequate advance planning and poor project coordination by METRO and the city are the main reasons projects aren’t finished on time.”
"And unless the Public Works Department keeps accurate records, it's extremely difficult to hold any contractor accountable," she said.
According to Mayor White, who requested the report, “This report of projects completed prior to this administration covers projects initiated largely prior to the stewardship of Public Works Director Jon VandenBosch and highlights the need for tighter management."
New era in street construction
The mayor noted that some changes have already been made, including a consolidated tracking of delays in project schedules and grading of contractors and design professionals. He also said initiatives are underway to expedite substitutions of sureties and better coordination with utility companies.
The investigation began with a sample of 196 construction projects. More than half were completed past the original contracted completion date. The Controller's audit team selected 25 for in-depth review: 17 from the city (at 200% of original construction days) and eight from METRO (at 130%).
Design changes aplenty
The projects finished approximately 5,000 days behind schedule. Nearly 3,000 of the additional days were attributed to project design changes and coordination issues. Project design changes were caused by adding or deleting work, utility conflicts and inaccurate drawings. Conflicting work on the same street or delays in the city’s bid process caused coordination problems.
Auditors had originally planned to review all projects for five years prior to June 30, 2003. However, due to time constraints and the lack of a complete and accurate database in the city's Public Works and Engineering Department, the scope of the review had to be narrowed to 196 projects completed or substantially completed during Fiscal Years 2002 and 2003.
Auditors noted that there was no logical order to the documentation provided by PW & E, and in many cases, vital information, such as completion reports, final payment records, change order forms and design information, was not included. METRO’s files were thorough and complete.
No contractors debarred
Of the 196 projects included in the review, just 14 had to be turned over, or were being turned over, to sureties for completion. Neither the City nor METRO has debarred any contractors.
The report was meant to be an examination of the worst cases and was never intended to be a comprehensive review. The report is available online at: www.ci.houston.tx.us/citygovt/controller/audit.html
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Audit, Operations star in Money Matters |
Ask any voter what the City Controller's Office does, and many will reply, "fiscal watchdog." Others will be stumped.
Answering that question is one of the goals of Money Matters, the show that makes sense of city finances. This month's show spotlights the important work of two Controller's Office divisions: Operations and Technical Services and Audit.
The May show will examine the difficult challenges in the upcoming FY05 budget and feature the work of the Controller's Financial Reporting Division.
Money Matters can be seen at 2 a.m., 8 a.m., 2 p.m. and 8 p.m. Mondays on the Municipal Channel (Warner Cable 16, Kingwood 14, TCI 16, Phonoscope 2 and TvMax 20.)
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