City Revises Budget Predictions AGAIN -- $38 mil Shortfall

http://www.chron.com/cs/CDA/story.hts/metropolitan/648513

Aug. 28, 2000, 10:51PM
City budget shortfall may hit $38 million
By MATT SCHWARTZ -- Copyright 2000 Houston Chronicle

In what is expected to be the final tally on fiscal year 2000, figures released Monday show the city took in nearly $38 million less than it had budgeted. The city also spent $20 million more out of its general fund than it took in, dropping that balance some $8 million below required reserve levels.

Although preliminary, the revised figures are not expected to change significantly in the coming months as the controller's office puts together the city's Comprehensive Annual Financial Report. The new figures close the book on what has been a frustrating year for the Brown administration in which revenues fell far short in several categories.

Administration officials say most of the blame can be placed on sales tax collections that were lower than expected and a shocking plunge in Municipal Court fines. Had property tax revenues not come in $15 million higher than expected, things could have been a lot worse for the city and Mayor Lee Brown. As it was, the revenue shortfall, which grew almost every month since last August, forced departments to curb spending and delay hiring until after the fiscal year ended June 30.

Despite the shortfalls, the city was never in the red. The city's budget includes a cushion of unspent dollars equal to 5 percent of the general fund to satisfy credit rating agencies. City Council boosted that reserve cushion to 7.5 percent, or about $77 million, to cover the cost of any unexpected calamity, such as a hurricane. While the city wasn't in the red, the shortfall did drop the city's reserves to $69 million, or about 6.65 percent of the general fund. It also affected the city's cash flow, forcing the administration to borrow some $20 million from a water and sewer account to make payroll during the final two weeks of the fiscal year.

The estimated overall shortfall is nearly $7 million more than the Brown administration predicted earlier this month, when it estimated the general fund would wind up the year about $31 million shy of expectations. More than half the difference since then, administration officials said Monday, was the result of June sales tax revenues coming in $3.7 million short of projections. Another $3 million was cut from earlier revenue estimates after the administration reversed a plan to count cable television revenues the city had yet to receive. That plan prompted City Controller Sylvia Garcia to accuse the Brown administration of "cooking the books."

Throughout the last year, Garcia's office has challenged the administration's revenue estimates, saying they were too low. As far back as last November, the controller was projecting a $31 million shortfall while the administration was predicting $12 million. The controller's shortfall estimates did drop to $20 million in the spring, but began to climb again almost immediately as sales taxes continued to come in below expectations.

Deputy City Controller Sharon Adams called the latest figures a vindication of the revenue projection methods used by the controller's office. "We've been accused by the administration of doing a worst-case scenario," she said. "It shows the controller's office is not the voice of doom. It's the voice of reason. And we're glad people are finally listening to us."

The latest financial figures are a part of the monthly financial report, which is to be discussed at today's City Council Fiscal Affairs Committee meeting. The report reflects revenues and spending for the period ending July 31, the first month of fiscal 2001. According to the administration, revenues thus far appear to be at budget. The controller's office, however, already is projecting a $5.5 million shortfall in sales taxes, basing that on a comparison to sales tax collections during the same period last year.

The administration has hired University of Houston economist Barton Smith to formulate a model for more realistically estimating sales tax revenues. He is expected to present that model -- and possible adjustments to the administration's sales tax projections -- in September.

The controller's office also has questioned the administration's revenue projections for Municipal Courts this year, but said it will wait until next month's financial report before deciding whether to revise its own estimates.


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Could they just say that we're behind by $50 million, and give us some good news later??? It can't be that hard to balance the checkbook on LAST YEAR!!!!

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If I'm reading this right, the only reason they were in the black was that they pulled from the piggy bank (cash reserves). I'm guessing this is money we are going to have to put back this year.

The other thing that bothers me is the cash flow problem -- despite the $69 mil in reserves, the city came up $20 mil short in cash at payroll time. My old finance professor said that one of the surest signs a business was on shaky ground is when it runs into cash flow problems -- you have to have enough money in the checking account to cover the bills.

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Jeff, (or anyone else. )

Do they have to have all the details worked out to put the measure on the ballot?

I know it's a good idea, (no one would vote for a blank check!) but I thought the ballot just authorized the HCHSA to use the funds on the arena, with very few other details.

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