This past Saturday, the Houston Chronicle published an editoral on the City of Houston's finances. The editoral from Houston's newspaper of record generally offering praise for Mayor Bill White's handling of the City of Houston's public monies in a worldwide economic downtown. The Chronicle's editorial board wrapped up their assessment of the Mayor's financial wizardry with a statement that
With little more than 7 months remaining in his last term, Mayor White has deftly steered Houston through both fiscal and tropical storms. His successor will have a tough act to follow.
Hmmm. The Wizard decided to make his own assessment of the City's finances. I spent part of this evening gazing into my crystal ball, from whence I found the City of Houston's fiscal year 2008 Comprehensive Annual Financial Report (aka CAFR).
Amongst the items of interest are:
1) The status of the City's pension plans. There are three plans listed; one for the firefighters, one for the police officers, and the Municipal Pension system that covers everyone else. The status of these plans can be read on page 123 of the report:
A) The actuarial value of the assets of the firefighter's pension plan was $2 billion in 2004 and $2.633 billion in 2008. The accrued liabilities in 2004 were $2.266 billion in 2004 and $2.892 billion in 2008. Overall, the funding ratio of the firefighters plan improved from 88 percent to 91 percent.
B) The actuarial value of the assets of the police officer's pension plan was $2.394 billion in 2004 and $3.005 billion in 2008. The accrued liabilities in 2004 were $2.875 billion in 2004 and $3.858 billion in 2008. Overall, the funding ratio of the police officer's plan dropped from 83 percent to 78 percent. In 2002, the police officer's plan was funded at a ratio of 90 percent.
C) The Municipal Employees pension plan had assets of $1.501 billion in 2004 and $2.194 billion in 2008. The accrued liabilities in 2004 were $2.634 billion in 2004 and $3.128 billion in 2008. Note that the liabilities in 2004 were $3.278 billion. Overall, the funding ratio of the MEPS plan was 57 percent in 2004 and 70 percent in 2008.
One wonders how much of an improvement executing a lien against the downtown Hotel of the Americas improved the HMEPS balance sheet? Better yet, the City is keeping its funding ratios more or less the same, but the dollar values of the mismatch between assets and liabilities is growing. Is the City accruing pension and other liabilities that it cannot afford?
2) On page 246 of the report, one can read about the amount of general bonded debt outstanding owed by the City. In the time frame between 2004 and 2008, the amount outstanding rose from $1,979,786,000 to $2.926,444,000. On page 209 of the report, the CAFR states that the amount of taxable property went up from $103 billion to $135 billion. Per Capita debt levels went up from $985 to $1325 per City resident.
It seems to the Wizard that property values are not increasing at a rate that would sustain continued bonding to accrue, especially since we are in a recession.
2) On page 226 of the Adobe file (or page 196 of the City CAFR), one can read that the total primary CoH net assets have fallen from $5.371 billion in 2003 to $3.891 billion in 2008, a drop of about $1.5 billion. The Wizard is not an accountant, but it seems that during Mayor White's tenure as Mayor, the City devoured its accrued capital (in all of its forms) in order to keep the ship of state afloat.
3) On page 229 of the document, the City states that general revenues from property taxes went up from $639,888,000 in 2003 to $829,837,000 in 2008. The difference between property taxes from 2007 - 2008 was a rise in property taxes collected from $738,578,000 to $829,837,000. According to the Mayor's revenue cap, it seems that Houstonians may be in for a bit of a refund if Council actually follows the cap.
It was also noted recently that Richard Vacar, a longtime powerful administrator of the Houston Airport system retired abruptly. ABC's Mya Shay broke the story and the Chronicle is following it.
Speculation on Vacar's retirement has focused on Vacar's involvement with airport operations in other cities and country, denoting that a non-profit was involved on the deal. Kevin and company talk about it here, wondering about transparency issues or shoddy deal making that would reflect on the Mayor.
A better question to ask is why did the Houston Airport system start working on such deals with airports elsewhere in the first place? The motive for that, gentle readers, can be discerned from the 2001 City Revcap battle and Mayor White's counter charter amendment, which the seems to have prevailed in court. The Mayor's charter amendment offered a cap in increases in revenues from property taxes and drainage fees to the lower of of 4.5 percent per year, or the increase in population and indexed inflation.
It should be obvious to readers that any monies to be gained from the Houston Airport system would not fall under the Mayor's Revcap charter amendment, whereas it would have under the citizens Revcap. Ergo, it would make sense for the City to aggressively pursue such avenues for increased revenues to come into City coffers since they would not be covered by the Mayor's charter amendment.
I am at a loss in explaining why the Mayor canned Mr. Vacar. That is a job for the media to uncover. Better yet, will one of Houston's fourteen City Council members work up the political courage to confront the Mayor, a man whose administration is seeing the twilight of its rule, at the Council table and ask a simple question: Why Mr. Vacar was abruptly asked to take a walk?
Sigh... Such are the joys of taking a job that is so inherently political in nature.
Wizard
Posted by The Mighty Wizard at May 18, 2009 11:22 PM