TIRZ Funds, Redirected to Balance City Budget, threatens Southwest Houston Projects

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SHARPSTOWN ZONE AMONG HARDEST HIT

With renewed attention on the structure of city finances, Mike Morris and Rebecca Elliot penned an enterprise story in Sunday’s Houston Chronicle about the challenges of city investment zones. (City development zones face scrutiny for trapping tax revenues) This is an excellent piece which simplifies a complicated subject. They reveal that in order to balance this years overall city budget, Mayor Turner (with likely no other option) redirected almost $20 million from TIRZ zones across the city. No area was more negatively impacted than southwest Houston, with the so called municipal services fee charged by the city jumping by almost 700%, erasing at least $3 million in funds this year for projects, and for those into the foreseeable future.

As Morris and Elliot report, $19.6 million was redirected from city wide TIRZ accounts through an increased municipal services fee. Using a model that accounts for population growth and inflation, Sharpstown and Uptown appear to take the brunt with an increase of $3 and $8 million, but while facing a higher fee, zones like Midtown will still have millions to spend.

“As a quick fix, he (Mayor Turner)  did ask the wealthier zones to send an additional $19.6 million back to City Hall this year to cover increases in the cost of basic city services Houston provides within their boundaries.”

The Southwest Houston zone was planning to have these funds for other projects beyond the Bellaire and Fondren Road improvements. But now that all remaining cash flow has been redirected to balance city finances, funds simply will not be available, at least in the near term.

Southwest Zone revenue is based on the property taxes collected above the base value set in 1999. Last year the zone collected $6.5 million of which $4.2 million was used to make bond payments, with about $1 million for the city municipal fee and administration. This left about $1.5 million for projects not including residual funds from debt issued.

In FY2017, the TIRZ No. 20 budget calls for a whopping 25% increase in revenue to $8.2 million with the municipal fee increasing by $3.1 million, a 700% jump. This ambitious revenue assumption reduces the portion for projects to a mere $25,000, but in all likelihood reserve funds and other one time items from prior years will probably be needed to make the books balance.

tirz-20-budget-snip

IMPACT ON SHARPSTOWN AND SOUTHWEST HOUSTON

At the regular meeting of the Southwest Houston Zone on Sept. 1st, the executive director described the situation to the board members and to the handful of attendees from the general public. It was made clear that under the current budget structure, funds will not be available for the next major project, a $2 million redevelopment of Sharpstown Park Pool and Golf Course (CIP T-2007) which will be delayed.

Other projects such as the Club Creek detention basin and park, Harwin road improvements, and any effort to improve the Mall seem a fantasy under the current city budget structure.

A solution to refinance existing debt, at an additional cost of $19 million in interest over the term, was presented and approved. This strategy which will require city council action will give the TIRZ short term cash flow to pay the increased fee to city hall, but at a tremendous cost. The extra interest payments will almost match or exceed the entire cost of the Fondren Road project alone.

TRANSPARENCY STILL A DREAM

I’d like to give you a better view of how we fared versus Uptown and Midtown, but Andy Icken’s office (COH Economic Development) refused to provide copies of the budgets (except our TIRZ No. 20).  I’m bewildered as these were always made part of the council backup agenda, but it seems are no longer to be shared with the public.  It’s amazing that hundreds of millions in spending is approved by Council, yet those budgets are not released to the public by city hall before approval.

Last year I wrote an Op-Ed piece published in the Houston Chronicle that identified for the first time the reason behind the successful effort by city leaders to expand the number, boundaries, and lifespan of TIRZ zones across the city. No longer is there any pretense, these zones simply beat the voter approved revenue cap, as this is their key feature. Many, as Morris and Elliot describe, do not consider their use equitable. There appears to be legislation brewing for the next session to reform these entities and their use.

Some may remember my questions to city officials beginning in 2014 at the District Capital Improvement Plan (CIP) meetings where I decried the lack of city wide resources for our community. TIRZ funded projects like Bellaire were touted as CIP successes, even though I pointed out they were funded with $50 million in bonds, all while city officials were comparing infrastructure bonds to credit cards as they pitched the success of Rebuild Houston. Now even our tax increment funding has been virtually eliminated.

MAYOR TURNER IN A TOUGH SPOT

To be fair, I applauded Mayor Turner for his leadership on the budget this cycle, as he had been handed a virtual jackpot when he took office. While I challenge the idea of redirecting revenue cap excluded funds back into the general fund, I understand why he chose this step, as he had little choice other than layoffs.

The pension mess is at center stage, and with a positive solution to that situation, perhaps we can revisit the zone issue, and restore the needed funding for Sharpstown and southwest Houston.

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