Elimination of Revenue Cap Could Come Before Houston Voters in November

Katherine Driessen of the Houston Chronicle reported over the weekend that Houston Mayor Annise Parker is working to convince City Council members to support a measure that would allow City residents to vote on adjusting a cap on how much revenue the City is allowed to bring in.  This cap limits the growth in revenues to factors such as population growth and has been an ongoing issue for at least the past several years.

Mayor Annise Parker plans to press City Council this month to reconsider loosening a decade-old revenue cap for public safety spending as talk of a looming budget deficit and possible service cuts grows more ominous around the dais.

The cap limits the growth in city revenues to the combined rates of inflation and population growth. Last year, the city hit the cap for the first time, forcing a property tax rate trim and preventing $53 million from flowing to city coffers. Next fiscal year, the triple threat of soaring pensions costs, revenue cap limitations and debt payments will leave the city facing a $126 million deficit.

Repealing or tweaking the revenue cap, however, is a difficult pitch to make to voters, who approved the limit in 2004. Parker would likely face a strong conservative campaign casting the city’s financial troubles as a spending problem rather than a revenue issue. Even city officials acknowledge that the revenue cap is no cure-all and would have to be coupled with reining in some expenses.

As noted by Ms. Driessen, the renewed interest in this issue is in part due to Moody’s recent downgrade of the city’s debt outlook (which I wrote about in a previous post).  Several Council members, including City Councilwoman Ellen Cohen, are now rethinking their previous positions on this issue. Deciding whether the problem is too much spending or not enough revenue is not as important as the fact that something needs to be done relatively soon.  If this proposal is approved by council members and is allowed to go before voters in November, it may make for an interesting debate topic among mayoral candidates.  In so doing, the outcome of this proposition might set a course for how the City handles other difficult fiscal matters in the future.

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