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.