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Have I mentioned lately that the revenue cap is stupid public policy?

Because it is.

BagOfMoney

Sales taxes are Houston’s second-largest source of revenue for the general fund, which pays for most core services.

Just as concerning for city officials, however, was more news about the city’s largest general fund revenue source: property taxes.

Mayor Sylvester Turner, as he did in February, criticized what he said is an unjust and inequitable system that lets commercial property owners abuse legal loopholes to successfully challenge their property appraisals and pull millions out of local governments’ budgets.

As of February, the hole created by those tax lawsuits was to be a projected $16 million for the current fiscal year, which ends June 30. By Wednesday, Turner and his finance director, Kelly Dowe, said that projection had risen to more than $32 million.

Council cut the property tax rate last fall to ensure the city would not collect more property tax revenue than is allowed under the city’s decade-old, voter-approved revenue cap, which limits growth in property tax collections to 4.5 percent or the combined rates of population growth and inflation, whichever is lower.

Companies’ successful lawsuits are pushing tax collections below the cap, however, with no way to adjust the rate back up to fill that hole.

“It’s a double hit. Last year you all lowered the tax rate based on the revenue cap. Had we known then we were going to be down another $32 million, I don’t think you would have lowered it that low. You cannot budget that way,” Turner said. “I will again ask the Legislature to remedy this situation. Taxes from hard-working homeowners should not effectively subsidize wealthy commercial property owners.”

But hey, look on the bright side: The system is working exactly as designed.

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7 Comments

  1. John says:

    Turner needs to look at his own people, his treasurer and top outside advisor (David Minberg) is in commercial real estate and benefits 100% from the system. A bit hypocritical by the Mayor to complain when his buddies benefit from it

  2. Paul Kubosh says:

    We wouldn’t be having a problem if one of our prior Mayors hadn’t negotiated a stupid pension plan.

  3. Steve Houston says:

    PK, you know that isn’t true. Given the spending habits of Houston’s mayors for the last 25+ years, the city was going to have one problem or another no matter where they shorted spending. Lanier’s massive increase in classified personnel while using $50 million a year from Metro coffers wasn’t sustainable, nor was his original plan for DROP accounts (unlimited interest rates, unlimited time to participate, ability to boost pensions based on overtime). If you applied the new accounting standards to his spending, the numbers would have looked far worse in the 90’s too.

    Given any increases in pensions by Brown at the end of his term were quickly mitigated by his immediate successor White at the beginning of his term, including massive pension concessions and a payback scheme he has since admitted was “never designed to fully fund pensions”, then Parker’s unwillingness to cut personnel to sustainable levels, there are plenty of places to point the fingers, including every single city council member from that time period, the suggestion that a single mayor was more responsible than another or those who were elected to council seems highly questionable at best.

  4. Paul Kubosh says:

    Well you point to the City Council members? They don’t have any power. I stand behind my comment that I think your post bolsters. The order of responsibility goes like this:

    1. Brown
    2. Lanier
    3. White

    They just didn’t care. If City Council members had any power then the City of Houston Municipal Courts wouldn’t be running in the Red.

  5. Steve Houston says:

    PK, you did say: “We wouldn’t be having a problem if one of our prior Mayors…” (emphasis on “one”). But city council members most certainly have ample power to stop a mayor by voting against an item. In this case though, they did NOT WANT TO vote against any of those benefits mayors put forth, each of the council trying to outdo one another in how much support they offered, including those who were considered GOP darlings (Tatro raised an objection one time but that was it, later voting to increase). On issues where a council member or three do have an issue, it is usually out of personal self interest that they are all too willing to sell out as long as they get something else they want in return.

    But your list is incomplete and not properly ordered, here’s why:
    During his reign, Lanier gave employees no real raises, only increases in health care costs and continually reduced coverage. That was during the longest sustained period of economic growth in our country. The idea behind DROP was to retain seasoned employees and reward loyalty by giving employees the money they would have earned in existing pension benefits so they wouldn’t leave to go to other agencies (fire and police) to earn a second pension. By hiring many hundreds of additional public safety employees without a long term funding mechanism, he set the stage for all related problems, knowing full well that the first five or so years of an employee’s career are the cheapest.

    Brown gave classified employees actual raises, primarily police, as he was in charge of the department when Mayor Kathy not only rescinded a small raise in the 80’s but cut benefits, increased costs, and lowered pay. By the time he was mayor, Houston was the lowest paying city by far and he sought to close the gap a little since employees had not received an across the board raise (except for Chief’s, department heads, elected officials, and political appointees) in almost 15 years.

    My pick for the biggest culprit though is Bill White. He not only lowered compensation for existing employees, increased insurance costs, and then led the charge to lower pensions, HE was the one that established a funding level for police and municipal pensions that led to the ballooning deficit while he continued to spend on frills. It was the under funding that led to the problem, not the increases in pensions that he not only removed but went a step further and lowered below what Lanier’s term had provided.

    Parker, who had happily voted in favor of all pension boosts as a council member and never lifted a finger as City Controller to point out that paying half a bill would eventually catch up to us all, something I believe was her responsibility by statute, continued to kick the can down the roadway and never managed to say a thing about White’s move. As a willing conspirator, suggestions that she bore no culpability seems strange on the face of it. That she publicly displayed her animosity towards HFD repeatedly and denied them raises only served to entrench their stance that they shouldn’t have to give up pension benefits given they were/are something like 146th lowest paid in the country, a three year Austin rookie fireman making more than a 25 year senior HFD captain.

    Keeping it all in perspective, most of the three pension boards never supported any of these people running for office. HFD’s union did not support Lanier, did not support Brown, did not support White, and most certainly did not support Parker. The other two groups did not have unified unions until after Brown but even then, HPD endorsed Locke, not Parker and HOPE’s composite groups couldn’t agree on what day it was during much of this time frame.

    As far as the municipal courts are concerned, the city should just petition the state to make most offenses civil matters and be done with it, reducing the need for bonds and most trials.

  6. Jules says:

    Turner isn’t hypocritical because David Mincberg is his transition chief, he’s a hypocrite because he’s pushing forth tax breaks for businesses that they neither need nor deserve. These tax breaks are at the expense of the people.

    Mincberg is a really good guy. Turner should listen to him.

  7. As usual the Kubosh’s haven’t compared fire or police pensions state-wide.

    Last i read, firefighters in houston and corpus christi had the worst pension payout state-wide at 20 years.

    This all public info by the way.

    Let’s not forget…

    2 recessions in 10 years
    TIF
    TABOR
    For-profit health insurance
    Public Bank
    Commercial real estate appraisal loopholes

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