PROP A

Houston Chronicle Sunday - - OUT OF CONTROL - mike.mor­ris@chron.com

Vot­ers, the mayor says, are sim­ply be­ing asked “to reaf­firm what al­ready is.”

And so Propo­si­tion A is chiefly about fi­nanc­ing. The char­ter change barred the is­suance of new debt for street and drainage re­pairs, switch­ing in­stead to a pay-asyou-go model to be paid for in part by the new fee. It com­mit­ted a por­tion of the city’s an­nual prop­erty tax rev­enue to streets and drainage so that, as old road bonds were paid off, more cash would be­come avail­able for projects. Grant funds from other gov­ern­ments also were added to the pot. And it capped main­te­nance and op­er­a­tions spend­ing from the new fund at 25 per­cent.

Since its launch, about $1.9 bil­lion has flowed into the Re­Build pro­gram for re­con­struc­tion or re­pair work — in­clud­ing an es­ti­mated $780 mil­lion in drainage fees — and more than $620 mil­lion in prin­ci­pal has been paid down on city debt.

Yet Hous­ton Pub­lic Works now projects that far fewer dol­lars will flow through the pro­gram than was en­vi­sioned in 2010, de­spite re­peated storms hav­ing made con­cerns about drainage and flood­ing even more pro­nounced.

The city data show the pro­gram beat its orig­i­nal rev­enue pro­jec­tions by an aver­age of about $30 mil­lion each year from 2011 to 2015, then missed its orig­i­nal tar­gets by roughly that amount in each of the last two years. Over the next seven years, Re­Build is pro­jected to gen­er­ate a cu­mu­la­tive $900 mil­lion less than orig­i­nally en­vi­sioned — about $125 mil­lion per year.

There are two key rea­sons for that.

First, a math er­ror — pro­po­nents said the fee would aver­age $5 per house but that turned out to be an un­der­state­ment, so for­mer Mayor An­nise Parker granted all prop­erty own­ers a dis­count. That change has lim­ited the city’s re­pair funds by a to­tal of about $100 mil­lion over the last seven years.

Sec­ond, there is Hous­ton’s voter­ap­proved prop­erty tax rev­enue cap. Since 2014, the city typ­i­cally has had to cut its tax rate each year to avoid tak­ing in more rev­enue than the cap al­lowed, since prop­erty val­ues have been ris­ing.

So where does Re­Build come in? The pro­gram was de­signed to cap­ture 11.8 cents of the city’s tax rate, gen­er­at­ing more money for projects as debts were paid off. Over time, this will be the fund’s largest source of rev­enue. As the city’s tax rate has shrunk, how­ever, the city has in­ter­preted the 2010 char­ter lan­guage in a way that has let may­ors re­duce the share of the rate de­voted to Re­Build, in­stead leav­ing that cash in the gen­eral fund.

These ad­just­ments re­duced Re­Build’s fund­ing by $10 mil­lion un­der Parker in 2016 and by al­most $50 mil­lion in each of the last two years un­der Turner, Pub­lic Works data show, as com­pared to the full 11.8 cents worth of prop­erty taxes be­ing trans­ferred to the fund. In the city’s cur­rent bud­get, this fig­ure is about $40 mil­lion.

These changes have con­trib­uted to an un­com­fort­able statis­tic for City Hall: Res­i­dents are pay­ing a new fee, but city spend­ing on street and drainage projects has barely risen. Hous­ton av­er­aged $176 mil­lion a year on cap­i­tal street and drainage projects from 2007 to 2011, and $180 mil­lion from 2012 through 2018. These fig­ures in­clude some projects that were only street paving, with­out ac­com­pa­ny­ing un­der­ground drainage pipes, and the num­bers for the 2018 fis­cal year are pre­lim­i­nary.

Turner ac­knowl­edged the pro­gram, as de­signed, would gen­er­ate more cash than it is to­day, but said the Re­Build model is still the right ap­proach. The city’s strat­egy, he said, should be to avoid new debt and lever­age its funds with Har­ris County’s $2.5 bil­lion flood con­trol bond and com­ing fed­eral re­cov­ery funds tied to Hur­ri­cane Har­vey.

Bob Jones, the owner of Jones En­gi­neer­ing So­lu­tions and a key Re­Build pro­po­nent in 2010, said his fig­ures show the pro­gram is close to its or­ga­niz­ers’ orig­i­nal mod­els. If spend­ing ap­pears not to have risen un­der Re­Build, he added, it’s in part be­cause large projects the city did in part­ner­ship with the state in the years be­fore 2010 skew the fig­ures.

Jones said his view is that the city should not have been able to budge from de­vot­ing the full 11.8 cents of its prop­erty tax rate to the pro­gram.

“I’m hop­ing that, go­ing for­ward, we’ll get to the full 11.8 cents and we’ll juice the pro­gram up and we’ll ex­ceed the pro­jec­tions,” Jones said.

Coun­cil­man Mike Knox said he has been telling vot­ers in­quir­ing about Propo­si­tion A to “flip a coin,” as nei­ther out­come will change what taxes or fees cit­i­zens pay. As for whether the vote will put a “lock­box” around the fund­ing for streets and drainage — a word Turner uses of­ten — Knox said muddy ac­count­ing em­pow­ers the pro­gram’s skep­tics and leaves him un­sure of what to tell con­stituents.

Re­Build is com­prised of drainage fees, prop­erty taxes, grants and a tiny fee on de­vel­op­ers, but when the city spends money from the Re­Build fund it rarely spec­i­fies which fund­ing source is be­ing used. This has long let crit­ics in­cor­rectly ac­cuse the city of, for in­stance, us­ing the drainage fee to pay hun­dreds of Pub­lic Works em­ploy­ees’ salaries.

“I can’t in good con­science say we even have a lock­box be­cause the four fund­ing sources are com­min­gled — there’s noth­ing where I can go to see that the money from the drainage fee went into this ac­count and the money is go­ing to this ac­tiv­ity,” Knox said. “When I call and ask the ques­tion, they say, ‘No, it’s be­ing used for ap­pro­pri­ate pur­poses,’ and I have no re­course.”

The Nov. 6 elec­tion could have a tan­gi­ble im­pact on the city’s fi­nances, but it will de­pend in part on the out­come of sev­eral pend­ing law­suits that rely on court ac­tion void­ing the 2010 elec­tion. It also will de­pend on the ac­com­pa­ny­ing char­ter lan­guage ex­empt­ing the drainage fees from the city’s rev­enue cap and adding “streets” and “curbs” to the def­i­ni­tion of “drainage” in­fra­struc­ture — words that are not in the state law that lets cities charge drainage fees.

In one case, plain­tiffs ar­gue the drainage fees should be re­paid to tax­pay­ers, or that the por­tion spent on street sur­faces should be re­funded. In an­other, they ar­gue the fees have ex­ceeded the rev­enue cap.

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