City’s late fees to vendors are soaring
In eight years under Turner, slow payments have resulted in $1.1 million in penalties
Mayor Sylvester Turner’s administration has racked up more than $1 million in late fees over the past eight years due to slow payment to vendors, as the city faces an uncertain financial future.
Since Turner took office in 2016, taxpayers have spent $1.1 million in late fees after the city failed to pay vendors within the one-month time frame required by Texas law, according to data provided by the controller’s office.
That is about $137,800 of additional annual spending and marks a substantial surge from the late fees paid out by the previous administration.
During former Mayor Annise Parker’s tenure from 2010 to 2016, the city paid $33,100 in late fees, or around $5,500 per year, according to budget documents produced during Parker’s administration.
Typically, staff members in various city departments are responsible for processing their own vendor invoices for goods and services, said John Seydler, a spokesman for Controller Chris Brown’s office. These departments pass along the information to the controller’s office for final approval and payment.
It is not clear whether the delays causing late payments primarily came from his office failing to process payments on time or city departments failing to submit invoices promptly, Seydler said. He said an extensive audit would be required to determine the answer.
Seydler highlighted his office’s limited capacity as a key factor contributing to the rise in late fees. The number of city vendors has expanded over the last decade, he said, but staffing levels at the controller’s office
have not kept up.
He did not provide specific numbers to show the growth in the number of city vendors. But the city’s budget documents reveal the number of full-time employees at the controller’s office dropped from 60 in 2016 to 54 currently.
Texas law requires a local government to pay a vendor within 30 days after receiving goods or services, or the invoice for them, whichever is later. In 2014, the city introduced a policy to standardize invoice processing and give vendors the option to offer a small discount in exchange for early payment.
Before the policy change, city staff had more flexibility to decide which date marked the start of the 30-day period, Seydler said. The new system, however, sets more stringent guidelines for when the payment countdown starts and has contributed to the increase in late payments, he said. That makes it difficult to make direct late-fee comparisons between Turner’s and Parker’s administrations.
Parker, who served as Houston’s controller for six years before becoming mayor, called the amount of late fees racked up during Turner’s tenure “an eyepopping number.”
“It’s a big bureaucracy with millions of outflowing payments, and things can get lost or sit on somebody’s desk,” Parker said. “Mistakes happen, but if you’re doing the work properly, you should be able to keep it to a minimum.”
The mayor’s office and procurement division did not provide answers to questions about the role of city departments in the increase of late payments.
There were at least 17 cases during the Turner administration where a late fee exceeded $5,000, according to data from Houston’s Open Finance platform, an interface launched in 2022 to help Houstonians understand city budgets. The tool covers data from 2018 to 2023 and is administered by the city’s Finance Department.
Ambassador Services, a janitorial and landscaping company, received a total of $27,500 in late fees from 2018 to the present. The Houston Housing Authority, a federally funded agency, was paid $18,800 in overdue fees during the same period.
Brenntag Southwest, a longtime chemical supplier for the Houston Public Works Department, has been paid seven late fees totaling $14,200 since 2018. Cokinos Energy, which supplies natural gas and related services to city facilities, collected a late fee of $9,200 this year.
Overall, 55% of the city’s late fees from 2018 to the present went toward vendors of Public Works, data from Open Finance shows. Fifteen percent came from payments by the General Services Department, which manages city facilities. An additional 10% was paid to vendors of the Housing Department. No other department accounted for over 5% of the city’s total overdue fees.
Erin Jones, a spokeswoman for Public Works, said these invoices were processed by the Finance Department and not her department’s team. The Finance Department declined to comment.
Although the $1.1 million in late fees represents a small fraction of the billions of dollars the city pays to vendors annually, the skyrocketing amount of late fees is still noteworthy, particularly in light of Houston’s ongoing financial challenges, Parker said.
Houston typically operates at a structural deficit, where expenses grow faster than revenues. With federal COVID-19 relief dollars nearing depletion, city officials have forecast budget deficits between $114 million and $264 million during the next mayor’s first term.
Chris Hollins, the newly elected controller set to take over in January, has pledged to help tackle the city’s projected budget shortfall by aggressively auditing city operations. Parker said the rising late payments are precisely the kind of issue Hollins needs to investigate.
“There could be many reasons (for a late payment to occur), but not any good ones,” Parker said. “It is worth a deep dive by the incoming controller.”