OPINION: Why is the City of Houston always short of money? – Part I

As many of you know, I have been closely following the City of Houston’s finances for nearly two decades. Over that time, the City of Houston has been chronically short of money to fund basic municipal services. One major result of this has been a historic underfunding of infrastructure. The most glaring example of this can be seen in the condition of our streets.

As I explained in a post last year, based on lane miles of City streets and the average life of pavement, the City should be resurfacing about 400 lane miles each year. But according to the annual audits, the last time the City resurfaced 400 lane miles was in 2004. For the last decade, the average has been about 150 lane miles.

The same trend is true across a wide range of City services. We have fewer police officers and firefighters than we did twenty years ago. Response times are at all-time highs. Water lines breaks are ubiquitous. The City wastewater system is one of the region’s largest polluters and has been under a consent agreement with the EPA mandating improvements since the 1980s. Most parks are poorly maintained, and we have hundreds of acres of parkland that has never been developed. The list goes on.

When citizens complain about the poor service, the response for a long time has been that the City does not have enough money to address their problem. A certain cadre of pundits attribute the lack of funding to the voter-imposed limit on City Council raising property taxes without voter approval, which was adopted in 2004. Yet since 2004, total City revenues have grown by an average of over 8%, far outstripping inflation plus the City’s population growth and the wage growth for the region. Also, property tax collections since 2004 have increased at an average 6.5%, well above the supposed limit of population growth and inflation.

So, with that kind of revenue increase, how is it possible that the City is constantly telling citizens how broke it is?

The easy, and frankly, intellectually lazy answer, is to blame the City’s financial woes on waste and fraud. While those have certainly played a role, they are not the principal culprits. The City is financially challenged primarily because of some decisions that were made by previous City leaders, some decades ago, and the failure of subsequent leaders to recognize and/or take the necessary actions to alter these fundamental dynamics. 

The City’s fiscal can has been kicked down the road for too long. We are reaching a critical juncture. The former City Controller, Chris Brown, warned in each of his annual reports on the City’s financial condition that we have been running an unstainable structural deficit for many years. The Greater Houston Partnership recently commissioned a Rice Baker Institute study that came to the same conclusion. The City got a reprieve from going over the fiscal cliff in the last few years from the huge influx of federal assistance associated with COVID and Hurricane Harvey. But that money is quickly running out. 

In the next few posts, I am going to attempt to explain what I think are the underlying issues with the City’s finances and suggest some course corrections. Unfortunately, the City’s finances are wickedly complex, so this will quite a bit of explanation. My discussion will not be for those who can only think in sound bites or who traffic in partisan talking points. But if you are interested in a deep dive into what is wrong with the City’s finances and what can be done to return the City to a sound financial footing, stay tuned.