18 Oct City Bond Election: Pension Bonds – YES / Improvement Bonds – NO
As many of you are aware, the City will hold a bond election on November 7. Early voting begins next Monday, October 23. There will be five bond propositions (A-E). The first (A) seeks approval to issue $1 billion in bonds to shore up the police and municipal pension plans. The other four (B-E) are “improvement” bonds asking mostly for funding for the purchase of police and fire vehicles, and improvements to City parks, health clinics and libraries. I intend to reluctantly vote for Proposition A and against Propositions B-E.
Proposition A – $1 Billion Pension Bond
Some of you will recall that during the campaign I advocated using pension bonds to refinance the City’s debt to the pension plans. But I said bonds should only be used as part of a plan that would convert the City from defined benefit to defined contribution plans. Notwithstanding that over 70% of Houstonians favored moving new employees to defined contribution plans, we did not get that in the bill that was passed in the Legislature. As a result, we are destined to revisit this issue again one day.
Even though defined contribution plans are not part of the “reform,” I believe the better course is to approve these bonds. They are part of a trade the City made with the police and municipal unions that both reduces their benefits and requires greater contributions from their members. There is some disagreement over exactly how much the City will save, but it is substantial – roughly double the amount of the bonds. That is a reasonable deal. It is not a solution to our pension problems. But when we are forced to deal with this issue again, these changes will make the problem less severe at that time.
There are many in the pension reform movement that intend to vote against the pension bonds as a matter of principle, preferring to precipitate a fiscal crisis that would result in real pension reform. While I am sympathetic to that point of view, I have concluded that the damage that would be done to the City and to individual citizens is too great. So, I am going to hold my nose and vote for the pension bonds. But I certainly understand how others may have a different view.
Propositions B-E – $495 Million Improvement Bonds
Propositions B-E are a grab bag of various expenditures. However, there is not one penny in the package for streets or flooding. This will be the City’s second bond election (the first was in 2012) that does not include any money for streets or flooding because of the City’s misguided reliance on a “pay-as-you-go” model coming out of the 2011 drainage fee fiasco. Since we adopted that model, our streets have continued to deteriorate. And I don’t think I even need to say anything about the flooding since then. Until the City gets its act together on fixing our streets and addressing our flooding problem, I am not voting to give them one more dime for anything else.
Instead the city is proposing to spend over $115 million for new vehicles and another roughly $200 million for repairs and renovations, which appear to mostly be deferred maintenance. The itemized uses also include:
- $7 million in “salary recovery” costs (Read: “We are going to use bond money to try and balance the general fund.”)
- $2 million for bike plan implementation
- $350,000 to replace TVs and lighting in City Hall
- $1.2 million in facility assessments
- $296,000 for park design services
- $2 million for playground equipment and ball field lighting.
Regardless of the merits of these various expenditures, it is absurd to finance them over the 34 years that the City is proposing. And I know you will be shocked to learn that the amortization schedule that the City plans to use back-end loads the payments, conveniently pushing off the peak of the payments until all the current elected officials will be safely out of office. (By the way the same is true for the pension bonds.)
This is exactly the kind of financial can-kicking that has gotten the City into the fiscal mess it is in today.
Until the City puts its fiscal house in order by adopting zero-based budgeting, consolidating overlapping functions with the County, ending the diversion of drainage money to balance its budget, and reducing its per-employee compensation cost (currently $94,000 per employee), to mention but a few examples – and until the City gets it priorities in order, Houston taxpayers should go on strike. No more bonds. No property tax increase.