Frequently Asked Questions and Answers Regarding the Finance Corral
Following are FAQ and Answers that were used regarding the Proposition 2 Amendment to the City Charter
approved by Houston voters in November 2004. Prop 2 requires voter approval before the City can increase total revenues
by more than the combined rate of increase in population and inflation. These FAQ and Answers may be helpful in public
discussions relative to a proposed city charter amendment regarding your city's finances. Please feel free to add or
delete FAQ and Answers or revise them to fit your particular circumstances.
Forthcoming debates should bring this Q&A detail into broader circulation and clarify the issue for concerned voters.
- Q1) Precisely what is this proposed charter amendment about?
- Q2) What triggered the perceived need for this charter amendment at this particular time?
- Q3) What can Houstonians expect if this proposed amendment fails to be approved by the voters?
- Q4) How effective are tax and expenditure limitations (TELs)? Has this proposed charter amendment been compared to TELs actually enacted?
- Q5) The proposed charter amendment requires that any increase in the City’s total revenues above the population/inflation cap will require the approval of 60% of those voting at a regular election. Why not just a majority requirement, rather than 60%? Isn’t 60% a pretty severe requirement?
- Q6) Isn’t Exhibit A misleading? Water and sewer debt and revenues had to be expanded to cover the environmentally mandated capital expenditures, plus the City debt has been recently impacted by the expansions of the airport and the convention center.
- Q7) Who authored this proposed amendment to the city charter?
- Q8) Who accomplished getting the proposed amendment on the ballot?
- Q9) Won’t the revenue cap under the proposed charter amendment cause the City to have to cut City services and lay off City employees?
- Q10) The media has abounded with accounts of the City’s supposed crumbling infrastructure and mobility problems. Won’t the charter amendment prevent any significant investment in infrastructure and mobility needs?
- Q11) If the proposed amendment already had been in effect for several years, it would have prevented the airport expansion, the building of the convention center, and the massive expansion of the sewer system to accommodate the environmental mandates, wouldn’t it?
- Q12) Why does the proposed charter amendment place the flexible cap on revenues rather than on expenditures?
- Q13) Wouldn’t the proposed charter amendment then, in effect, give Houstonians the right to commence voting on revenue bonds, something they now cannot do? Why is that now a good idea, when not before?
- Q14) Won’t all of this forcing of the City to blend citywide debt service into an overall financial discipline formula make bondholders and the bond rating agencies nervous? Remember, back during “Tax Vote ‘97” two bond rating agencies threatened to downgrade the City’s bond ratings if Tax Vote ‘97 passed.
- Q15) Won’t those same predictions be repeated regarding this proposed amendment?
- Q16) By capping the total revenues of the City, the proposed charter amendment lumps the general operations of the City in with the water and sewer, airport and convention center operations. Aren’t those three special types of operations conducted under separate legal entities, and wouldn’t the proposed charter amendment therefore create problems with the debt issued by those three separate types of City operations and create other legal problems?
- Q17) But doesn’t lumping the general operations of the City with the water and sewer, airport and convention center operations create problems in that the voters would then become involved in making decisions on infrastructure issues better understood by City planners, airline companies, and those in the tourist and travel businesses?
- Q18) Texas law and Houston city ordinances require that water and sewer revenue bonded debt can only be serviced from water and sewer net revenues (operating revenues less operating expenses). Won’t this proposed City charter amendment hamper or prevent the City from maintaining sufficiently high water and sewer rates? Won’t the proposed amendment therefore create difficulties in selling City water and sewer revenue bonds and cause bond ratings to drop on water and sewer revenue bonds already outstanding?
- Q19) The City is proposing to add a new drainage fee to the existing transfers of excess water and sewer revenues to cover the costs of alleviating flooding problems. Won’t the proposed charter amendment prevent having monies available to cover the flooding problems?
- Q20) There has been increasing opposition to the continued transfers of excess water and sewer revenues (“Any Lawful Purpose”, or “ALP”, monies) from the Water and Sewer (W&S) Fund to the General Fund. How will this proposed charter amendment impact that undesirable practice?
- Q21) Texas law and Houston city ordinances require that airport system revenue bonded debt can only be serviced from airport net revenues (operating revenues less operating expenses). Won’t this proposed City charter amendment hamper or prevent the City from maintaining sufficiently high airport rates? Won’t the proposed amendment therefore create difficulties in selling City airport revenue bonds and cause bond ratings to drop on airport revenue bonds already outstanding?
- Q22) Why is the airport system included in the total revenues subjected to the cap? We need to keep expanding our airport facilities if we are going to continue to grow and be a world-class city. Won’t the proposed charter amendment prevent that, or at least significantly interfere with plans of the airline companies and federal airport grant requirements? Besides, the City’s airport revenues consist principally of fees charged to the airline companies, parking and concession franchise fees. How do those fees possibly impact Houstonians?
- Q23) Texas law and Houston city ordinances require that hotel occupancy tax revenues can be used only for specified convention center and tourism related purposes. Won’t the proposed charter amendment interfere with those legal requirements? Why is the convention center operations included in the capped total revenues?
- Q24) You present a conflicting picture. First you say that the City has more than enough net revenues from its water and sewer and airport operations to service the related revenue bond debt, yet in the last two decades the City’s total gross bonded debt has increased at almost four times the combined rates of increase in inflation and population. How can that be?
- Q25) Why are you so concerned about the City’s long-term debt? A Greater Houston Partnership task force reported in 2001 that the City could save considerable money by refinancing its debt and extending its maturities, thus even removing a need for an increase in the property tax rate.
- Q26) You have made several references to the fact that taxpayers got to vote on only about 17%of the City’s unpaid long-term debt. How can that be?
- Q27) You mention that the City’s long-term debt has grown over the last two decades at a rate approaching four times the combined growth in the City’s population and inflation. Won’t placing a cap on total revenues exacerbate the problems in servicing the City’s debt?
- Q28) Issuance of public improvement bonds often results in an increase in the property tax rate. If the City is adding capital improvements with the bond proceeds, why isn’t an increase in the property tax rate justified?
- Q29) “Let The People Vote On Taxes”. Clever slogan, but you know that the City’s property tax rate for maintenance and operations is already capped at $0.50/$100 valuation, by a charter amendment passed by taxpayers in the early 1980s. Therefore, isn’t this amendment unnecessary relative to property taxes?
- Q30) I thought that the Texas Public Utilities Commission sets utility rates. How can Houston voters put a cap, even a flexible one, on water and sewer rates?
- Q31) Well, the state certainly sets the City’s maximum sales tax rate; what effect would this amendment have on the City’s sales tax rate?
- Q32) Won’t this amendment cause the City to have frequent and costly elections?
- Q33) SUBSECTION FOUR of the amendment seems a bit much. Why is this necessary?
- Q34) Houstonians recently experienced the disastrous Allison flood. Won’t the charter amendment prevent the City from addressing the consequences of such emergencies?
- Q35) SUBSECTION EIGHT of the proposed charter amendment specifies who may sue for enforcement of the amendment. Isn’t it better to also have a mechanism in place for reasonable assurance that the amendment will be complied with in the first place?
- Q36) How is it fair to require that the City use a previous year’s combined rate of growth in population and inflation for computing the allowable increase in the current year? In the face of constantly increasing population and inflation couldn’t the City find itself to be occasionally behind in reasonable allowable growth rate for total revenues?
- Q37) The proposed charter amendment specifies that the annual population data, other than in federal official census years, shall be obtained from the State of Texas’ State Data Center, rather than from the federal census bureau. Why is that?
- Q38) The proposed amendment indexes the initial affected fiscal year back to the City’s fiscal year ended June 30, 2001. Won’t that present a financial impossibility, a requirement that the City give back to Houstonians “excess” total revenues in the intervening years, as well as begin the initial covered year at a total revenue base much less than that actually experienced in the last pre-amendment fiscal year? Isn’t this even more of a problem in that the City claims to have serious problems in meeting its current budget?
- Q39) Then based on your answers to Q38, the City will have essentially complied in fiscal 2002 and 2003 with the cap set forth in the proposed charter amendment. Therefore, why won’t you just let the elected officials govern and not complicate matters with a complex, hard-to-administer city charter amendment?
- Q40) How will this proposed city charter amendment affect the City’s future participation in professional sports facilities and joint ventures with other governmental entities such as downtown bayou beautification?
- Q41) How will this proposed city charter amendment affect the City’s relationship with METRO?
- Q42) How will this proposed city charter amendment affect the economically disadvantaged?
- Q43) How will this proposed city charter amendment affect city employees?
- Q44) Apparently your group believes there is little downside to voter approval of this charter amendment?