Invisible Government – Tax Increment Reinvestment Zones in Houston- Texas Public Policy Foundation Panel – Jan 2017

(Panelists: Charles Blain, Sen. Sylvia Garcia, CM Larry Green- District K, Jim Bigham)

With Governor Greg Abbott and Lt. Governor Dan Patrick’s recent spotlight on the tremendous resources  carefully partitioned off within the City of Houston’s Tax Increment Zones (TIRZ), I thought this would be a good time to revisit a policy discussion held earlier this year about this so-called invisible government.

I joined Charles Blain with Empower Texans, along with Sen. Sylvia Garcia and Council Member Larry Green – District K, to  present on this TPPF panel prior to the regular session of the 85th Texas Legislature. The friendly and informative conversation quickly went into the details of how little transparency and accountability exists with Houston’s two dozen or so TIRZ or Tax Increment Reinvestment Zones.

Several bills were filed relating to TIRZ reform, but like the special district legislation they went exactly nowhere. This video is a good primer into the topic of TIRZ and how they have constrained spending to areas that were never considered “blighted”, a key requirement of the enabling legislation Chapter 311.

In a rebuttal to Gov. Abbott, Mayor Sylvester Turner remarked that the TIRZ are simply “state creations” implying state control or supervision. In truth, these zones are simply allowed to be formed under the Texas Code Chapter 311, and are almost exclusively municipal creations by ordinance, with the Mayor , under the City of Houston Charter, having complete control.

In recent years with a soft, voter-approved property tax revenue cap in place, the City of Houston has been highly motivated to expand TIRZ boundaries and lifespan as the revenue cap leaves a loophole for increased tax collection. All property taxes directed to TIRZ are exempt from the cap, something I discovered in 2015 and wrote about in the Houston Chronicle:

“What’s driving the infatuation with tax-increment zones inside the city of Houston?

The answer seems to lie in the consequences of a 2004 voter-approved change to the city charter that created a revenue cap. The cap limits the growth of property-tax revenue. In 2006, this cap was raised by an additional $90 million for public-safety spending. This year, for the first time, the city has bumped into the revenue cap and was forced to reduce collections by over $12 million.

But that charter amendment contains a loophole that excludes property taxes dedicated to tax-increment funds. Today, every single dollar directed to a TIRZ is exempt from the revenue cap. This creates a strong incentive to expand the use of tax increment reinvestment zones. Ballooning from about $30 million in 2006, TIRZ revenue in 2014 was $135.9 million.”

In 2017, Mayor Turner pushed through a hike in the so-called Municipal Services Fee charged to some TIRZ, fully permitted by Chapter 311, for the increasing cost of city services. This funneled about $20 million, that would have been disallowed by the revenue cap, through the TIRZ accounts, and back to the general fund to balance the budget for FY18.

What will that $20 million be spent on? I have no idea.

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