Census figures blow hole in city budget

$17 million likely lost unless Houston wins appeal with agency By Mike Morris

In posting a sluggish population growth estimate for Houston, the U.S. Census Bureau blew a $17 million hole in the city budget.

City officials had expected the count would show Houston had added about 30,400 people by January from the year prior. The Census Bureau on Thursday, however, estimated the city grew by just 9,200 between July 2016 and last summer.

Because the revenue cap voters approved in 2004 limits the city’s annual increase in property tax collections to the combined rates of inflation and population growth, that means Mayor Sylvester Turner must adjust his proposed $2.5 billion general fund budget.

Or he will, if he is unsuccessful in challenging the census estimate. The city’s estimates, he said, are more up to date and are “based on greater familiarity with local indicators.”

To challenge the estimate, Houston can submit data on topics such as residential building and demolition permits, mobile home placements, household sizes and apartment occupancy rates. No wiggle room

Houston successfully challenged its formal count in the 2010 census, and also added 3 percent to its population estimate via an appeal in 2006, and a little more than 1 percent to its 2008 count, according to the Census Bureau website.

Turner’s budget proposal already closed a general fund shortfall of $114 million, avoiding employee layoffs by transferring money from special accounts to the general fund, cutting spending and, chiefly, by tapping the city’s reserves. Most of the $84 million being drawn from reserves comes from a $29 million lawsuit settlement and $28 million in better-than-anticipated sales tax revenues.

If Turner solves the new $17 million problem by again drawing from reserves, the balance in that fund would drop to a little more than 8 percent of the overall general fund budget.

That is more than the city’s minimum requirement of 7.5 percent but less than the 9 percent that credit ratings agencies prefer, Controller Chris Brown said.

More concerning, Brown said, it would leave the city only about $10 million to spend before violating the 7.5 percent threshold, since the city’s $20 million rainy day fund was spent after Hurricane Harvey and has not yet been replenished with federal reimbursements.

“You’re not leaving yourself a lot of wiggle room. We don’t have a rainy day fund anymore,” Brown said. “We need to make sure we have enough money in the reserves to address any unforeseen challenges.”

Turner said successfully challenging the census count would “guarantee a proper funding cushion for local government operations,” but said taking the funds from city reserves would be a suitable fallback.

“We balance the budget every year and run a lean government operation, always mindful that we must use the people’s money in the most effective and efficient way,” Turner said. “Part of our budget-hawking approach involves making sure we have a healthy cash reserve in case of emergencies.” Police raises

Turner plans to spend $2.5 billion from the general fund, which is supported primarily by property and sales taxes and funds most core services, such as the police and fire departments, parks, libraries and trash pickup.

The overall budget is $4.9 billion, a figure that also includes the “enterprise” funds — those supported by fees, such as the Houston Airport System, and the city’s utilities, which run on residents’ water bills.

The general fund budget is $83 million, or 3.5 percent, higher than the current year’s spending, an increase driven in large part by a $42 million increase in debt service, related mostly to last year’s issuance of $1 billion in pension obligation bonds as part of the mayor’s pension reform package.

Also driving the increase is $14 million in previously agreed-to raises for police.

About 57 percent of the general fund, or $1.4 billion, goes to public safety — the police and fire departments, the municipal courts and emergency operations.

Council members have submitted 34 amendments to Turner’s budget; he opposes 26 of them.