A while back, in the discussions over at blogHouston’s forums, we were having a discussion about the garbage tax, and I made a response to correct the mistaken impression of another reader that we were already paying for garbage with our water bills. While blogHouston has a much larger readership than Houblog (even when I’m writing here regularly), it occurs to me that it was too informative a piece of writing to remain buried in the forums where I feel certain not all readers go. So I have copied the response here below for anyone who may have missed it.

Before the Mayor effectively disconnected the cost / rate equation, the water bill had zilch to do with the solid waste. Now it has zilch to do with anything. The accounting is fairly technical, but the way it’s divided is simple: Solid Waste gets funded from tax revenue every year, whereas Public Utilities is funded from user revenue. The two funds don’t mix at that level. I’ll leave aside what happens when the Council loots any surplus, as happened under Brown. Such funds [go into the General Fund, and] are not directly transferred to any other Department, and there is no correlation between the amount of utility revenue and Solid Waste budget anyway.

What do I mean by disconnect? The way it was supposed to work is that every year, the department would examine the bond service, the cost of operating the system, the labor, and all the etceteras, to determine how much money needed to be raised on an annual basis. Multi-year projections, going forward, blah, blah, blah. However, owing to the asinine design of the department, only the capital costs, debt service, and operation of the Public Utilities Division got counted on the costs side. Guess what got left out? Billing. The costs of the Utility Customer Service Branch, if not all of Resource Management, got omitted from the equation. So, on the surface, COH was running a slight profit on utilities — in reality it was probably running a deficit! A Jefferson Wells audit calculated the per-account cost of administration and billing to be around $2.30 per month. This would mean about $1,000,000 per month, easy.

So in 2004, when the rates were finally increased after 11 years, the Financial Management section of Resource Management proposed a $2.35 fee to be added to the sewer bills of all customer accounts, in order to pay for those costs. At which point the infighting started — to put it bluntly, this would cause one section to be singled out publicly. It made zero sense anyway — if you’re going to split out administrative costs, then do it for the debt service, the treatment costs, the repair and maintenance costs, etc. Furthermore, why add the cost to the sewer? There’s thousands of accounts that have only water, with no sewer (industrial supply, sprinkler systems, fountains, etc.) Yet their administrative cost is virtually the same.

So what happened? Take a gander at this. Look at single and multi-family sewer rates. That’s the fee, reduced to $1.00, with three years of automatic increases added. And businesses don’t pay it. In fact, nobody pays it but homeowners and apartment complexes. If the definition of a compromise is, “a bad solution that pleases no one,” then I think this fits.

Since 2005, the rates automatically increase by the amount of inflation in the tri-county metro area. What this means is that the actual costs of running the department no longer matter. They can be be higher, they can be lower, they can be unchanged. But whatever the overall rate of inflation is according to the U.S. Dept. of Labor, that is how much the bills will increase. And now that I think of it, is this a violation of the city charter, since it doesn’t seem to fit the (non-technical/legal) description of an Enterprise Fund? And if it is a violation of the charter, will the Mayor break the rate structure as fast as he breaks some leases?

I’d just like to add that, while searching for additional links to add to this post, I looked through the City Controller’s site, and noticed several curious things. Firstly, the Consolidated Annual Financial Report for FY 2006, which ended nine months ago on June 30th, is not on the website. The latest is 2005. Second, you’d think that if the site has multiple pages to explain about the Controller’s office, its function, and its history, it could find space for a page of basic information on the city budget, and how it is organized. Some quick facts, maybe even definitions of things like “Enterprise Fund” and so on. Why, schoolkids could use it for civics assignments (if they still have such a class, and it hasn’t been replaced with “How to Hate America” and “Western Civilization is Evil” lessons). Also, there’s been some very interesting audits released recently. Not that we’ve heard much about them in the press…