As we go to work tomorrow and the next day, the reality of the City of Houston’s financial condition will continue to be glossed over by city leaders. Only recently did the city’s finance director announce that the city is out of magic tricks. They have sold every city asset with any value and these one-time cash infusions used to balance the city budget are over. It took us a few years to get here; but, I am now of the opinion that it is time to file for bankruptcy.
In case you missed it, I previously wrote about the city’s financial problems when council members called a special meeting to address the fire union contract. The city’s firefighters struck a backroom deal with the mayor and a few council members objected. Other council members, like Brenda Stardig, thought the union should have received more than the negotiated amount. Therein lies the problem: Stardig either (1) is not mindful of the city’s financial condition and/or (2) pacifies the public unions to gain their endorsements. She is not alone.
I listened to the recent city budget debate and it was interesting to hear the mayor castigate Jack Christie for mentioning the “B” word – bankruptcy. The mayor said that she worried his comments could hurt the city’s credit rating. She was right when Moody’s turned the City’s outlook to negative. The pitiful financial state of the city is no secret. Anyone buying our bonds needs to have their head examined. A few years ago, we could have turned the corner, put responsible adults in charge, and attempted to rein in the city’s spending; but, we are way past that now. Houston is Greece.
During the “special” city council meeting called by three council members to discuss the firefighter union settlement, council member Jerry Davis suggested that, “We will just raise taxes to fix the debt problem.” Senator Paul Bettencourt laughed and pointed to the facts: property taxes would have to be increased by fifty percent for ten years to pay off our current pension debt, assuming the city did not spend another dime.
You have to think about the implications – what would the city look like after a fifty percent tax hike?
Many people would flee the tax increase, which, financially, might not be a bad thing – less people to be served by the city. Property values would plummet. Think Detroit.
If the city simply disappeared, the county would step in and govern. No doubt the county could do a better job. Better basic services such as police, fire, and roads. Maybe privatize ambulance services.
All city politicians are against bankruptcy because they want to control the piggy bank. Filing for bankruptcy now allows us to regain control of our city after years of reckless spending, cuts off reckless spending, and allows us to renegotiate our union contracts. A Federal Bankruptcy Judge, responsible adult, would be making spending decisions.
Tomorrow, the mayor will float the idea of raising the revenue cap and taxes. Even with record revenues in the city, politicians cannot balance their budget. Enough is enough. We can go through a decade of austerity measures with higher taxes and diminished city services or file for bankruptcy now and zero out the city budget. Chris Bell is an advocate for zero based budgeting.
Politicians, bond lawyers, financial consultants, investment bankers, and municipal securities brokers have created a heck of a mess. Who is going to get us out? The answer begins with the “B” word – file for bankruptcy now.
Great article Don. I know for
a fact that several of the
Mayor’s advisors have told
her that bankruptcy is the only way out. She prefers to
let the next Mayor clean up
mess.
Thanks Clyde!
I thought I would give everyone something to think about as they discuss raising the Revenue Cap.
Bill King for Mayornin 2015!
Interesting the Mayor is concerned about Christie’s comments, but finds no issue with her own actions. Her tenure as council member, comptroller and now Mayor gives her as much ownership of this problem as anyone else.
The Mayor signed an agreement with the firefighters to not lobby our legislature for local control of our pensions. Parker then complained she could not get local control. You really can’t make it up.
I just received a telephone call this evening suggesting that we allow gambling in Houston and tax it. Boy, is that a new idea. The last ditch effort. Thanks all you Mayors who have not had any courage. Things are getting desperate. And the oil industry is not going to save us.. Saudi Arabia is pouring out the oil to keep the fracking out of the market.
Short on facts to support bankruptcy. I guess we could the state of texas and federal government to do the same?
Of the 10 most populous states, Texas has the second-highest amount of local debt per resident, at $8,627, according to the Bond Review Board. Only New York has a higher local debt per capita.
As might be expected, Houston had the highest outstanding debt of any city in Texas, $13,150,526,369. Houston was followed by:
San Antonio: $9,424,770,314
Dallas: $6,555,273,086
Austin: $5,315,491,444
Fort Worth: $3,139,402,000
San Antonio, however, carried the highest per capita debt at $7,100, followed by Austin, Houston, Dallas and Fort Worth.
The chart below contains this data which shows how it has more than doubled over the past 11 years, rising from $72,051 per taxpayer in 2004 to $154,161 today. As the debt continues higher, the liability of every taxpayer is also rising
Time to start jumping from building, I don’t think so.
Explain why Bankruptcy is the only option?
Correction, we could get the state and federal government to do the same
Manuel,
Thank you for your information. I could have written for days. I wanted to put something out for today’s council debate.
I do believe filing BK prevents years of taxpayer suffering. Tax payers did not make these promises. More importantly, those that created the situation are not allowed to continue to do it. Bond lawyers, and financial consultants are nailed by suits and a Federal Judge makes spending decisions. We zero out our budget and we get to do Costellos pay-as-you-go system. There is nothing for a conservative not to like.
I wonder why the pensions can’t simply be renegotiated or eliminated? The legislation the state passed is totally flawed because it relied on completely manufactured data provided by the city to get them to grant the right to manage the pension systems. In the very first year the city did not pay the dollars needed to sustain the benefits they sold. They knew their 15{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} infusion of payroll costs with guaranteed 8.5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} growth actually required 53{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of payroll costs.
The whole system is based on a lie and the boards of these pensions are populated by the mayor, employee reps, and union reps. No citizen had any say. They have known since the beginning they were in trouble. Trouble is here. Kline-Miller can eliminate the muni-pension since they already meet the threshold of being below 80{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} funding.
For the pension debt alone I estimate it would take each homeowner 6 x their current City of Houston property taxes to get rid of that alone and we would still be stuck making the payments to 52 year old retirees/
Dan, thank you!
Also great information!