Structural budget gaps targeted by Houston Treasurer

Addressing Houston's structural budget deficit is at the top of city Finance Director Melissa Dubowski's to-do list.

The veteran of nearly a decade in the Houston government has served as deputy commissioner overseeing debt and cash flow forecasting since 2019. Selected for top post by Mayor John Whitmire, who took office in January.

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Dubowski said the administration's fiscal year 2025 budget, to be released in mid-May, will take “some first steps” to address the approximately $158 million structural gap.

“There's no one silver bullet,” she told The Bond Buyer. “It will require a combination of reducing spending, identifying new sources of funding, and identifying efficiencies in how to best utilize the funds we have.”

At the same time, the nation's fourth-largest city has a strong fiscal balance, supported by an influx of federal stimulus funds, Dubowski added.

The City of Houston ended fiscal year 2023 with a general fund balance of $550 million on June 30, up from $420.6 million in the previous fiscal year. Annual comprehensive financial report.

Dubowski said the outcome of contract negotiations to resolve a years-long impasse with the city fire department will affect future budgets. Shortly after he took office, Whitmire took steps to take disputes out of court and focus on resolution.he The city's appeal was withdrawn. A Harris County District Court judge's December ruling ordered the city of Houston to negotiate overdue payments and benefits from 2018, filed by the previous administration on Dec. 29.

Dubowski said talks continue with the mayor's goal of reaching an agreement by March.

Fitch Ratings, which rates Houston AA, said the upgrade would result in “sustainable public safety spending relative to its resource base, reduced sustainment costs well below 20% of government spending, and a strengthened spending framework.” It is possible that this could be achieved through a contract that will lead to evaluation. ” An agreement with firefighters that weakens that rating could lead to a downgrade, it added.

Houston is also rated AA by S&P Global Ratings and Aa3 by Moody's Investors Service.

Public safety is the largest expenditure in the Houston budget, with property taxes and sales taxes accounting for the largest sources of revenue.

A 2004 proposal approved by Houston voters capped property tax collections, while a subsequent proposal passed in 2006 authorized additional funding for public safety. Dubowski said options such as asking voters to repeal or amend the cap are “on the table.”

On the infrastructure front, he said the Whitmire administration is considering a $2.6 billion loan for a major renovation of Terminal B at George Bush Intercontinental Airport. Initial funding for the project was withheld Late last year, former Houston City Commissioner Chris Brown raised concerns about incomplete design plans and bond feasibility studies.

Dubowski said city capital projects financed through commercial paper backed by bank lines of credit could be affected by Texas law. Prohibit contracts with state and local governments with banks and other companies that “boycott” or “discriminate” against the fossil fuel and firearms industries;

“As we see the pool of eligible banks shrink, we anticipate that costs may increase because we are getting fewer offers,” she said.

Barclays was the most recently banned bank, followed by UBS and Citigroup, which subsequently announced they would reduce or end their municipal bond businesses across the country. Five other large banks (Bank of America, JPMorgan Chase, Morgan Stanley, RBC Capital Markets and Wells Fargo) remain under review by the Texas attorney general. net zero allianceaims to achieve net zero greenhouse gas emissions by 2050.

Houston's outstanding commercial paper outstanding was $646.4 million at the end of fiscal year 2023.