While the City Controller's Office does not produce the annual budget for City Council approval, it does report on spending and income monthly and produce an annual Trends report to put the the mayor's budget into historical perspective.

"Until this year, Houston had been blessed with phenomenal job growth and large budget reserves. We are finally experiencing the negative effects of the recession" City Controller Annise Parker said.

"With declining or flat property and sales taxes and rising fixed expenses, our cash reserves barely exceed the preferred 7.5% fund balance." Parker said the Controller's Office estimates that the city will have to draw down reserves about $87 million to balance the new FY10 $1.934 billion general fund budget approved this week. This leaves the city about a $1 million cushion over the 7.5% threshold, or about $125 million in reserves.

"I'm concerned that our FY10 projection for general fund revenue is $38.5 million less than the Administration's FY10 proposed budget, " she said.

Declining sales tax

According to Controller's Office estimates, general fund revenues for FY09 and FY10 show an overall increase of about 2.89% and a decrease of 0.42% respectively. FY10's projected revenues reflect modest growth in property tax and indirect interfund, which are negated by decreases in sales tax, electric franchise and the miscellaneous category.

"By the time council votes next summer on the FY11 budget, council may face difficult choices in balancing the budget and maintaining reserves above the 5% level required by city ordinance," she said.

Shrinking reserves

The need for a 5% cushion ($96.7 million of the FY10 $1.934 billion general fund budget) becomes painfully apparent every time a hurricane strikes . Tens of millions must be spent immediately for debris pickup, emergency services overtime and repairs. That temporarily drains affected departmental budgets, such as Solid Waste, and the city's $20 million Rainy Day Fund. So far, FEMA has reimbursed the city about $20 million less than it has spent. The projected shortfall is expected to be about $11 million. The Rainy Day Fund has not been replenished.

The total $3.58 billion city budget includes the general fund (mostly property and sales tax) as well as federal, state and other grant funds.

For the complete Trends report, see TRENDS. The final amended budget is not online yet, but the proposed FY10 budget is available at:
www.houstontx.gov/budget/index.html.