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Some in Construction Are Watching Houston’s Drainage Fee Controversy

We've heard from many construction executives in Houston who are watching the race for City Controller with great interest, largely because of one of the key issues being raised by candidate Bill Frazer: the city’s controversial drainage fee. The reason construction executives have been watching this closely is because some of them would be awarded contracts to build the drainage projects to be funded by the fee. But, the problem is there seems to be mismanagement of the fee – or at the very least it seems to be under-performing in a way that doesn't live up to the hype.

Bob Price at TexasGOPVote first noted these problems:

  • The 2012 drainage fee collections were only $108 million, $17 million less than targeted. 2013 and 2014 estimates are even lower, at $103 million for each year. This produces a three-year shortfall of over $60 million. It should also be noted that the ReBuild Houston website posts an interim report reflecting estimated drainage fees for 2013 of $121.5 million. The amounts shown in Exhibit 1 for 2013 and 2014 are from the Proposed FYE 2014 budget.
  • Maintenance expenses for 2012 were approximately $5 million less than the maximum, but in 2013 and 2014 they are estimated to exceed the maximum by $35 million. The net excess spending on maintenance from the fund for the three-year period is $30 million.
  • According to the 2012 CAFR, no ad valorem tax revenues were transferred into the fund for 2012. Under the formula noted above, $10 million should have been transferred in 2012. The City estimates and has budgeted approximately $11 million of transfers for each year 2013 and 2014. Under the required formula, the City should transfer $16.3 million in 2013 and $23.7 million in 2014, or $18 million more than estimated and budgeted.
  • And finally, the City has spent and budgeted a total of $2.1 million in debt service fees from the fund, which is specifically prohibited under the Ordinance.

Frazer – the Controller candidate – compares Houston to the now bankrupt Detroit, with some important caveats: “It’s important to note that Houston is NOT going to go into bankruptcy because we have too much good going for us, and I’m confident the good citizens of this city will come together and make hard decisions that will drive us farther down the road to becoming what we are capable.”

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