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The revenue cap has already hit

Lovely.

BagOfMoney

Houstonians will see their first property tax rate cut in five years as the city runs up against a revenue cap imposed by voters a decade ago.

The modest rollback works out to $12.27 a year for the owner of a $200,000 house with a standard homestead exemption.

[…]

The city’s current property tax rate is 63.875 cents per $100 of assessed value. Mayor Annise Parker’s administration is proposing to cut it to 63.108 cents, a reduction of about three-quarters of a cent. The tax rate formally will be set in October.

The rate reduction will not force immediate budget cuts, city Finance Director Kelly Dowe said, because the spending plan City Council passed for the fiscal year that began July 1 assumed property tax revenues would not exceed the cap. However, Dowe said, the cut means the city will collect $12.7 million less than it otherwise would have, and will have that much less on hand to deal with a looming $120 million deficit for the fiscal year that starts next summer.

The revenue cap is expected to have a much larger impact on that coming budget, exacerbated by the rising cost of city debt and pension obligations.

With this challenge in mind, some council members argued residents receive inadequate services today, and expressed dismay at the tax cut.

“I was in my district in the Sunnyside area this morning, and riding through and looking at the different basic services we’re lacking,” Councilman Dwight Boykins said. “And when I see a $12.7 million surplus that we, because of this property tax cap, cannot allow to go into the general fund to address some of the needs of my community, it’s a hard pill to swallow.”

Small government advocate Paul Bettencourt, who helped pass the revenue cap a decade ago, said the measure is working as intended.

“It was designed to trim back the tax load when the increases become too onerous for taxpayers,” Bettencourt said. “What needs to happen is, on an ongoing basis, as values go up, tax rates need to come down.”

Dowe and other city officials have discussed numerous ways of responding to the coming deficit, from amending the revenue cap to levying a garbage fee on homeowners to forcing city employees to pay a larger share of their health care costs to selling city-owned land.

I’ve talked about this before, and you know how I feel. All that this cap does is prioritize one form of spending, because that’s what this rate cut amounts to, over all others. That’s a stupid way to manage the city’s finances. If you think the city needs to spend less money on this or that, then fine – make your proposal and work to get it passed by Council. You get a guaranteed shot at this every year when the budget gets approved. If you think the city needs to prioritize certain types of spending over certain other types of spending, that’s fine too, but note that another priority has just cut ahead of yours in line and there’s nothing you can do about it. If you think the city needs to get serious about pensions and debt service and what have you, your job just got $12.7 million harder. The cuts that are being made now to deal with this can’t be made later to deal with that. The one thing we can do is fix our mistake and undo this dumb policy. I for one am going to have a hard time voting for anyone in 2015 that doesn’t support doing that.

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6 Comments

  1. Paul Kubosh says:

    Removing the Revenue Cap will not fix the problem.

    “$12.7 million surplus that we, because of this property tax cap, cannot allow to go into the general fund to address some of the needs of my community,”

    The money would not have went to his community. He knows that.

    Finally why is Dowe pushing the $800,000,000 justice center? This stuff is just unreal.

  2. Steven Houston says:

    Removing the revenue cap might not solve the problem of city spending but it would go part of the way to fixing the problem. There are no single answer fixes for problems of this magnitude. The $120 to $185 million dollar deficit includes a large chunk dedicated to the police pension on the assumption it would fall under 80% funded. The market has been incredible so maybe that estimated $50 million won’t be needed? How about the $1 million per Council district city council voted for themselves? IIRC, your brother voted in favor of the slush fund too (Parker, Costello and Christie were the only ones voting against it I believe).

    As far as the Justice complex, an expense for some time in the future, given the city has the police headquarters up for sale, the rat trap known as the municipal courts and former headquarters are in such a state of disrepair, and all the related issues coming up, it’s a tough call. If the city renovates all the existing facilities in need, cost estimates run from $50 to $150 million. Given city cost overruns of the past, that means $100 million to $200 million is what the fixes will need. Is it better to keep throwing good money after bad on an aging set of buildings as government tends to do or to do what the private sector does and rebuild altogether for the $800 million? At least with rebuilding, they will sell the existing facilities for perhaps $200 million if they don’t give it away on the cheap to Fertitta or Osteen.

    Given city overruns, I think having a private sector company come in, build it and then lease it to the city for 50 years might be cheaper than maintaining the existing facilities each year too. Yet each year you put it off in a hot market like this one will add another $50 to $100 million to the costs, it would take a team of analysts a lot of time making a cost benefit analysis to know which route was most cost effective in the long term.

  3. Paul Kubosh says:

    Well once again we find ourselves in disagreement:

    Increasing taxes does not decrease spending. “slush fund” that assumes the council member will have unfettered ability to spend the money. The thought is that if the district council member can spend the money in the district then there will be an opportunity for a little more local control. Also you take some control away from the Mayor (administration) which in my opinion is always a good thing. Of course we all know that the Mayor is not a vindictive bully that holds grudges. Your numbers on the justice complex are just all wrong. However, the mayor wants it so it has to be a good thing, right? Just like the feeding ordinance. (where are all the progressives?)

    Just finished watching the Cowboys now waiting for the Texans. Piece out.

  4. Steven Houston says:

    1) I agree that giving city politicians, including your brother, more money means they will spend more. Under current ordinances, a councilman can spend up to $50k without seeking approval of the rest, yes? Haven’t we all seen multiple purchases of just under an existing limit to bypass that rule in the past? Regardless, those millions were distributed to be spent when the council and mayor KNEW ahead of time that the coming several years will bring substantial hardship, revenue cap or not, and they took the money anyway. So much for Mike the fiscal conservative.

    2) I agree with you that the mayor is all sorts of things and holds grudges. My record of commenting speaks for itself on that topic.

    3) My numbers on the justice complex are at least as correct as anything I suspect you have seen and likely as accurate as anything your brother has seen. I say this in large part because your pal the mayor controls finance director Kelly who can adjust them as needed for the circumstance at hand, just as has happened in the past. There are voluminous stacks of reports discussing serious infrastructure faults and flaws in each of the existing buildings, far worse than that pesky sewage leak, the underground pipes bursting, and scores of other issues that have yet to be reported by the media. Still, if you rely solely on public reports from the executive branch of city government, some of them completely ignored by the media, my numbers are a best guess based on insider information. In my previous posts regarding city data, I have been applauded for having a better track record than most but by all means use them as a starting point to further the discussion.

    That said, I have my doubts on any of the stated suggestions for the justice complex project. There are just too many “what if’s” so while you may want the existing facilities kept as they are walking distance from your office rather than move them to a location of substantially cheaper land (there are two great proposed locations on the east side, another further south, and a few potential others that are so top secret I half suspect some on council own the land), I would rather see all the assumptions made for the existing numbers. The complex could be built with bonded funds rather than come from the operating budget, my personal preference being to take the money from the hotel and car rental taxes that currently go for art funding. That would mean waiting until Parker was out of office.

  5. Paul Kubosh says:

    Steven,

    Are your facts always this bad? Mike didn’t get the funds and the new complex is planned to be built right where the current municipal court and jail are located. Didn’t you know? I can’t stop laughing all this time you blogged like you were informed. Are you this far off on all of your blogs. You said we know each other. Why don’t you step from behind the Steve in Houston name and use your real name. You would have a lot more credibility.

  6. Steven Houston says:

    PK, my credibility has been proven time and again with regard to how things have gone down in the city and numbers that genius lawyers seem unable to find on their own. As far as the ultimate location of the complex, it has never seen set in stone but if you’d like to make a few quick calls in the morning to top real estate developers, you may be surprised at some of the options still being bandied about. As they say, it ain’t over until it’s over.

    As far as the remarks on cost estimates, projections, and related matters, I see you still have yet to provide anything beyond the generic $800 million mentioned in the local media a dozen times. If you believe said media “gets it right” with any degree of frequency, your own credibility is what is lacking. But again, I only suggest people use my comments as a starting ground to find out the truth, much like Kuff does, rather than demand you swallow an agenda hook, line and sinker.