The city of Houston likely will keep its existing property tax rate after receiving notice Wednesday that the state will deliver $50 million in disaster relief funds to southeast Texas communities affected by the May derecho and Hurricane Beryl.
The announcement by the governor’s office prompted a quartet of City Council members to withdraw their proposal to raise the city’s property tax rate by 5 percent to avoid a pending deficit that is expected to be worsened by storm cleanup costs.
Mayor John Whitmire said he spoke with Texas Gov. Greg Abbott’s team last week in Austin, telling them the city spent efficiently but was in “recovery mode.”
Whitmire said after the Wednesday City Council meeting that he anticipated Houston to receive the majority of the funds with at least enough to cover the city’s debris removal, not all storm-related costs.
Whitmire’s proposal to keep the existing property tax rate had been in competition with the council members’ pitch to raise the levy, which came in part because of the city controller’s warning last week that the city’s credit ratings could suffer without a new revenue stream.
City Controller Chris Hollins issued a statement Wednesday, saying the state disaster funds would not be enough to change the negative credit rating outlook.
“These much-needed funds are expected to offset most recovery-related costs, but they don’t change the $200 million budget imbalance we already had before storms hit the Houston area,” Hollins said. “Sustained measures to cut costs, increase revenues, and balance the budget are the only way to right the city’s financial ship and maintain creditworthiness.”
Whitmire commended the council members for tackling solutions to the deficit, but he denounced the “negative politicalization” of the city’s financial outlook.
“If you’re going to go around the city giving political speeches, other elected officials saying our hair is on fire, all you’re doing is impacting Houston city with the rating system,” Whitmire said.
At-Large Councilmember Sallie Alcorn, one of the council members proposing the increase, said they withdrew the measure because of the state announcement. However, the city still faces financial questions from upcoming police, fire and municipal workers union contracts, and Alcorn said the city still may have to consider tax increases in the future.
“I believed that when you find yourself in a hole, it’s best to stop digging,” Alcorn said. “I believe that this rate increase was the right thing to do, absent the information that came today.”
Whitmire’s proposal will keep the city’s tax rate at its current level of 51.9 cents per $100 of assessed value. The council members’ proposal would have raised it to 55.2 cents, which would have resulted in a difference of around $79 for the owner of a home valued at $300,000 with a standard 20 percent homestead exemption.
City Council is expected to further consider the tax rate at its Oct. 16 meeting.
Whitmire repeatedly has spoken against a property tax increase as Harris County and Houston ISD approved rate raises last month. He anticipates future cuts to the budget once the city receives the completed Ernst and Young audit of existing expenses, he said Wednesday.
He said the preliminary findings of the report include 40 percent of city directors are managing three or fewer people and half of the planning department staff is working from home.
“I could go on and on,” Whitmire said. “Just some good management tools that need to be practiced, but you know, you have to make government do it. Sometimes it’s not willingly.”
Whitmire also will be looking to leverage his county, state and federal connections to provide extra revenue to the city in the coming months. He gave the example of the county funding improvements to the recreational areas of Memorial Park.
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