This year’s proposed budget of $5.2 billion mostly maintains the status quo for the city, with a few exceptions.
Mayor Parker says the city’s pension obligations are up by 21 percent, which will cost the city an additional $45 million in the coming year. Though there’s not much growing room in the budget, she is asking council to approve additional funding for more animal control officers in BARC. And she’s setting aside an extra $10 million for short-term pothole repairs.
“As has been the case in every year of my administration, it does not require a tax increase to fund,” Parker said. “The budget will maintain full funding of the $20 million Rainy Day Fund.”
But Parker says there’s a potential budget shortfall for her final year in office.
It’s because of a charter amendment that was passed in 2004 that created a revenue cap on the city’s general fund. That simply means the city cannot make more than a certain amount from property tax revenue. And in fiscal year 2016, the city is projected to exceed that cap.
“We will be forced to significantly roll back city taxes, the city tax rate, to reduce the revenue coming into the city if that revenue cap stands as written today,” Parker said.
Former Mayor Bill White was in office when that revenue cap was passed. He says it was intended to provide a property tax break to Houstonians and that’s exactly what it’s doing in this case.
“It has occurred, from time to time, that if you have a real estate boom, then you’ll have homeowners that are not making much more income from year to year, but their property taxes will go up very sharply,” White said. “And this was intended to make sure that there was some accountability for that.”
The revenue cap serves as a built-in tax break for overburdened homeowners. But White says there’s also an avenue for city officials to get around the cap by asking voters to approve an increase for certain expenditures, an avenue he already tested in 2006.
“When we went to the voters and got an increase in the revenue cap to spend more on public safety in the aftermath of Hurricane Katrina,” White said.
Mayor Parker says she will likely take a similar proposition to the voters in 2015. But in the event that it fails, she must come up with other solutions to maintain a balanced budget in the next fiscal cycle. Among those options are cuts to services, additional fees for other services perhaps including garbage collection and recycling, and a push for pension reform.