Houston’s budget shortfall grows in wake of re ghter payout From the cover
Zooming in
The big picture
$1.1 billion cost over time with approximately $40 million-$80 million needing to be paid in the rst year. Hollins said even with the city having the highest savings account in history—$433.8 million—there isn’t enough money in the budget to cover the cost of the bond and the shortfall for more than a year. “I wouldn’t call [the city] broke, but we do have a real issue on our hands,” he said. “Even before the proposed re ghter settlement, we have a projected gap next year. We have what you might call a spending problem or a revenue problem, or a combination of both.” Although several council members have voiced their concerns with the agreement costs, Whitmire said he is eager to resolve the “long-festering pay dispute” and move forward.
The terms of the settlement with the union include paying $650 million in back pay owed to all current and retired re ghters for the eight years they worked without a contract. The agreement also includes a 10% pay increase, a ve-year contract moving forward and additional bene ts and incentives. Fire Chief Samuel Peña, who said he was not a part of settlement negotiations, noted the deal does not include bene ts to the operations of the re ghter department nor will it a ect response times. City Attorney Arturo Michel said the $650 mil- lion will be paid through the use of a judgment bond, which will incur a 4.25% interest rate over its 20-year life span. With the cost of interest and the approximately $450 million in pay rate changes that would start July 1, the city is looking at a roughly
The agreement is intended to end an 8-year legal battle that started in 2017 after the passing of Proposition B, which mandated pay parity between Houston police o cers and re ghters. Pay parity, according to Pew Research, means those in the same job and location receive fair pay relative to one another. The city and union were embroiled in ongoing legal con icts regarding the contract until Whitmire ordered the city’s legal department to withdraw from its challenges in January. The agreement, rst shared by Whitmire in a March 14 news release, would cost the city $650 million over the course of 20-25 years. Houston City Controller Chris Hollins said the rst year cost of the settlement could reach $70 million-$80 million, pushing the city’s projected shortfall for scal year 2024-25 to $240 million-$280 million. Houston budget shortfalls Houston has faced several budget shortfalls in the last eight years prior to budgets being balanced through one-time funding sources.
How we got here
Ongoing dispute
Nov. 2018: Voters approve Proposition B, which mandated pay parity between re ghters and police Houston Police O cers Union, city of Houston le suit challenging the constitutionality of Prop B
March 2023: Texas Supreme Court rules Proposition B unconstitutional; case is brought back to trial
FY 2016-17
FY 2020-21
FY 2024-25*
0
June 2017: HPFFA les suit against city of Houston
$200M without settlement
-$100M
-$200M -$150M
2017
2018
2019
2023
2024
2025
June 2023: Texas Legislature requires mandatory arbitration after council fails to approve a contract
July 2023: Union amends lawsuit, seeks collective bargaining for FY 2019-20 to FY 2024-25
Dec. 2023: Court denies arbitration for FY 2018-19, grants collective bargaining for FY 2019-20 to FY 2023-24
Jan. 2024: Whitmire orders city to withdraw from legal challenge
March 2024: Houston o cials announce terms of historic settlement agreement
-$250M
$280M with settlement
-$300M
*PROJECTED
SOURCE: CITY OF HOUSTON LEGAL DEPARTMENT COMMUNITY IMPACT
SOURCE: CITY OF HOUSTON OPERATING BUDGET COMMUNITY IMPACT
Options to generate revenue
What are the options?
Garbage fee Could add $100 million Property tax increase Could add $50M-$200M, based on rate Budget cuts Could add about $20 million
• Would equate to roughly $20/month for residents
exploring ways to cut expenditures, including: • Consolidating call centers • Reducing department budgets by 5% • Closing vacant positions City council members have also brought their own suggestions on how to close the budgetary gap to the table, including extending metered parking hours in the city to generate more revenue.
During a joint Budget and Fiscal A airs and Labor Committee meeting April 2, city o cials listed possible options for closing the budgetary gap and paying for the settlement. Potential new revenue sources include: • Adding a garbage fee • Adjusting fees • Increasing property taxes Finance department o cials said they are also
• Tax rate is $0.51919 per $100 valuation • Potential increase could equate to $15/month
• Public safety sectors such as police, ire and EMS not affected
NOTE: ALL NUMBERS ARE ESTIMATIONS AND NOT EXACT.
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