Since March, there have been rumblings inside the City of Houston’s PW&E department that a large shortfall was pending in the Combined Utility System’s funding. The public first learned about the city’s overall budget problems in Bill King’s oped, which we discussed here. The CUS, which is supposed to be independent of the city’s general fund is a separate issue altogether, though certain funding tricks used during the White era make their appearance once again. Specifically: back-loaded borrowing in which the city pays only a little up front, but then faces a balloon note down the road. According to Lee McGuire’s article for KHOU:
…nearly $1 billion in credit must be renegotiated early next year, and debt payments have spiked $50 million above earlier projections. All told, the system currently faces a $100 million cash shortfall – a significant problem for a department that took in $332 million in water bills last year.
“Re-negotiate” is CPA-speak for “re-finance” or “obtain debt relief, rather than default.” Simply put, the city’s rate-payers are about to face the music for years of living off borrowed money. How bad is it? The city has been making ordinary expenditures, such as yearly water meter purchases, from the capital funds instead of operating expenses. In household terms, they’ve borrowed money to pay for the groceries. And while this specific example represents only a tiny portion of the total, it’s one of the ways that total has been accumulated.
Today’s article was based on item #13 on today’s agenda, a proposal to hire consultants McKinsey & Co. to look for inefficiencies in the Public Works Department. This item was tagged and will return on next week’s agenda. Once again, the mayor is proposing to spend a large amount of funds for a questionable purpose. Unfortunately, KHOU’s article contains a few key errors, and some misleading statements. This may simply be the result of deadline pressure, or it may be that not all of the information provided to the press was…. shall we say, totally accurate.