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January 14th, 2013:

Interview with Todd Clark and Chris Gonzales of the firefighters’ pension fund

I have written numerous times about the ongoing battle between Mayor Parker and the Houston Firefighter’s Relief and Retirement Fund, which is to say the firefighters’ pension fund. After I noted a legal victory by the city in its attempt to get more information from the fund, I was contacted by a representative of the HFRRF asking if I would like to discuss the matter with Todd Clark, the chairman of the HFRRF. Of course I said yes, and we arranged an interview. Chris Gonzales, the Executive Director/Chief Investment Officer of the Fund, was also on the call. Here’s what we talked about:

HFRRF interview

Clark recently had an op-ed published that decried the city’s lawsuit. That District Court ruling has been appealed, though not to the Supreme Court as that Hair Balls story notes; it was argued last week before the First Court of Appeals. I’m neither an accountant nor an expert in these matters, but I hope I’ve helped shed a little light on this. If I get any response from the city to what was said here, I’ll be sure to let you know. My thanks to Todd Clark and Chris Gonzales for their time.

The Sports Authority’s finances are back in the news

I still have no idea whether this is something we need to worry about or not.

The firm that insures the Harris County-Houston Sports Authority’s $1 billion in bonds – sold to finance the homes of the Texans, Rockets and Astros – is calling on the cash-strapped authority to bolster its depleted reserves and warning of potential consequences if it does not.

MBIA Insurance Corp. Assistant Vice President Kenneth Epstein said this week the authority’s reserves are half what they should be and that the bulk of the agency’s debt, issued in 2001, has fallen short of revenue projections every year but one since then.

“We’ve been a willing participant over the last four years in trying to come up with a solution to the authority’s problems. The authority has not come back with any solution to what’s been happening,” Epstein said. “We want the authority to recognize that a problem exists, to bring people to the table, and to try to come up with a solution.”

The depleted reserve should be $55 million but is $25.4 million, Epstein said, putting the authority “in a very precarious position” and limiting its ability to handle dips in hotel and car rental taxes, its main revenues.

Sports Authority Chairman Kenny Friedman said the group is looking for a deal that could let it replenish its reserves and lower its payments in the long term, but said his board does not share MBIA’s urgency. The deal is structured to protect the city’s and county’s credit ratings and the stadiums, he noted.

“They are focused on what they should be focused on, which is protecting MBIA’s insurance obligations, and we’re focused on what we should be focused on, which is what’s right for this community and for these venues,” Friedman said. “We’re not going to do a deal just because it’s good for MBIA. It’s going to have to be good for the community. If we find one of those, we’ll do it.”

Friedman called MBIA’s concerns “strange” given that the insurer’s 2009 downgrade amid the financial crisis contributed to the strain on the reserves.

Important question: Are “Kenny Friedman” and J. Kent Friedman the same person? Because if they are, it’s the first time I’ve ever heard the name “Kenny Friedman”.

Be that as it may, see here, here, and here for some background. Not being a finance guy, I struggle to understand this stuff every time it comes up. County Judge Ed Emmett is quoted in the story telling MBIA to calm down, which reassures me somewhat but doesn’t really clarify things. I don’t know what else to add to this, so just consider this latest chapter in the saga noted for the record.

On conflicts of interest

Many members of the Texas Legislature have conflicts of interest, or at least they would if the rules on such in the Lege were more clear.

Advocates of a part-time legislature say the system keeps lawmakers in touch with their constituents. Lawmakers are expected to serve their communities, and check their personal interests at the Capitol’s massive oak doors.

A study of the personal financial statements filed annually by lawmakers with the Texas Ethics Commission shows most lawmakers’ professional lives are deeply intertwined with their government service, or are directly affected by legislation debated each session.

For example, last session saw Rep. Gary Elkins, R-Houston, lead a fight against payday loan controls while candidly acknowledging that the proposed restrictions would hurt his personal payday loan businesses. When pressed during debate whether his vocal opposition constituted a conflict of interest, Elkins replied, “On this particular issue, I am probably as knowledgeable as anybody, and I think the body (the House) needs to hear the expertise.”

Knowledgeable legislators also weighed in last session on reform of the Texas Windstorm Insurance Agency: Rep. Craig Eiland, D-Galveston, a lawyer who handled hundreds of thousands of dollars’ worth of claims against the insurance agency, and then-Rep. Larry Taylor, R-Friendswood, an insurance agent who has sold windstorm policies. Taylor, recently elected to the Texas Senate, chaired the committee overseeing TWIA; Eiland was vice chair. Both weathered a storm of criticism for their involvement in legislation with a direct impact on their private livelihoods.

What exactly constitutes a conflict of interest for a Texas legislator?

“The laws are too weak to provide any meaningful guidance for legislators and there is no meaningful enforcement,” said Tom “Smitty” Smith, director of the Texas office of Public Citizen.

One solution, Smith said, would be for lawmakers to follow the Texas Local Government Code, which advises local elected officials to abstain from issues affecting businesses in which they have more than a $15,000 investment or receive 10 percent of their income. “That bright line would be more effective,” he said. Currently, lawmakers do not have to disclose a dollar amount for each source of occupational income.

A big part of the problem is that being a legislator means needing to take a six-month leave of absence from your job every other year, for which you get paid all of $7,200. It’s not particularly conducive to holding a regular job, but that doesn’t mean there aren’t plenty of people who want to hire you. It’s just that these are often people and organizations with interests in particular legislation, and they want to hire you for your expertise as a legislator. As you might imagine, that can be a problem, especially since the rules of financial disclosure for legislators allows them a fair bit of leeway in describing how they earn their money. To me, the answer is to recognize that being a legislator is a fulltime job regardless of how much the Lege is actually in session, and pay legislators a salary that recognizes this. Once you do that, you can very strictly limit the amount of things for which they can be paid outside of their legislative duties, and ensure there are sufficient punishments for breaking those rules. I don’t expect anything like this to happen any time soon, but until then I don’t think we have much grounds to complain about what these folks do, or think they have to do, to earn a living.

More on metal recycling

The Chron has a followup story on metal recycling and hexavalent chromium.

Houston air experts plan to deepen their investigation into the air outside metal recycling companies after their measurements showed – apparently for the first time – that the businesses could be a source of potent fumes known to cause cancer.

“We are searching for money for more in depth testing, and also to get a feeling for what good controls would be,” said Loren Raun, an environmental statistician at Rice University, who works with the city of Houston.


Now the nation’s fourth largest city plans to expand its investigation of communities where the air may be affected. This week the Bureau of Pollution Control and Prevention’s mobile air monitoring lab returns to service following maintenance. On one of its first assignments, it will go to Holmes Road Recycling in the south of the city. Managers there are about to test a new vacuum system that operates while a worker is torching: It pulls smoke through a cyclone system to remove particles.

“In theory, it should make a significant difference in smoke and particles from any facility using the equipment properly,” said Don Richner, an analytical chemist with the Bureau of Pollution Control and Prevention.

If the new device makes a difference, the city could encourage other recyclers to employ it.

Another result of the testing is that Houston officials are questioning whether recyclers are exempt from the requirement to obtain air pollution permits. Businesses that pollute below a certain threshold are allowed to operate under what’s known as “Permit by Rule,” in which they state emissions are low. Pollution bureau chief Arturo Blanco said authorities will ask for proof.

Rice University’s Raun says researchers hope to return to the plants to test at a distance of one or two blocks. “We want to get a feel for what people farther out in the neighborhood are exposed to,” she said.

This would address a question raised by scientists that hexavalent chromium converts quickly to a less dangerous form of the metal. The city is collaborating with community groups, the University of Texas and Rice University in an application for a federal grant to pursue that research.

Background here. This sure seems like the sort of thing for which grant money ought to be granted. It’s groundbreaking research, and it could affect the way the EPA calculates the risks of air pollution. I look forward to seeing what their further tests find out.