The current fiscal year’s budget for the City of Houston includes revenue from the sale of some city-owned property to make it balance. This article talks about this and what might happen if they don’t sell before the end of the fiscal year, but it leaves out one critical piece of information:
Real estate sales of $40.6 million were built into this year’s budget based primarily on the sale of two properties: the public works building, which sits adjacent to the Federal Reserve Bank on Allen Parkway, and the city’s permitting offices at 3300 and 3400 Main.
With the sales, the administration would finish the year with a general fund balance, or surplus, of about $123 million. That would be about $3.7 million below the threshold the city has adopted as a measure of good fiscal stewardship.
If the sales do not clear before June 30, something the controller said is unlikely, the surplus could drop below $84.5 million.
Such a step would require a vote of City Council, since city ordinance requires maintaining a cash balance of at least 5 percent of operating expenditures, not counting debt service.
So, um, are there any buyers lined up? What stage of the purchasing process are we in here – finalizing the paperwork, haggling over the price, waiting for a buyer to get their financing in order, or waiting for a buyer to make an offer? Seems to me that makes a pretty big difference here. Yes, I know, the city and any potential suitors it may have will not want to speak on the record about any possible deals, but surely the point should be raised in the story. Without it, there’s no way to tell how big a concern this is.
One more thing:
[City Controller Ronald] Green said ratings agencies may look askance at dipping below that benchmark.
“Obviously, the more cushion you have, the better,” he said. “Any bank likes to see that people have money in the bank to be able to pay their debt. Going below that 5 percent is just not prudent.”
Acting Finance Director Kelly Dowe said he does not believe the city will dip below that mark. If it does, it will be temporary. The city would use the coming budget year to immediately restore the balance to 7.5 percent, or roughly $130 million.
This is another example of why “balanced budget” requirements are silly and counterproductive. Why shouldn’t the city be able to carry over the balance if it fails to meet an arbitrary deadline? How is that any worse than playing a shell game with the reserve funds? Or the “delay certain payments by a day so they fall into the next fiscal year” trick that the Lege has played before and will surely play again this session? I’m sure ratings agencies are perfectly capable of judging how realistic the city’s prospects are for getting the funds they’ve budgeted for in an appropriate amount of time, and can adjust their ratings accordingly. What exactly have we accomplished by marking a boundary point on the calendar?