Trend in the Region

Houston Victor Plans a Tight Ship

DALLAS — As Houston's comptroller, Annise Parker supervised millions of dollars worth of bond deals over the past six years. Now, as mayor, she will broaden her oversight of the city, with plans to tighten the budget and wield greater control over the Harris County Metropolitan Transit Authority that is expanding the city's light-rail system.

Parker, a Democrat who was elected Saturday with 53% of the vote in a runoff against former city attorney Gene Locke, succeeds Bill White as mayor. White, a well-regarded mayor with wide support across the city's diverse demographics, is running for Texas governor in the Democratic primary.

Despite her appeal to civil rights groups and her recognition as the first openly gay mayor of the city, Parker ran as a fiscal conservative who has saved millions of dollars through strict audits and commitment to sound management.

"I've managed billions of Houston's tax dollars — and today, Houston is in much better shape than other cities that gambled their futures on risky investments and irresponsible budgets," she said in announcing her campaign.

While the nation's fourth-largest city has outperformed others in the now two-year-old recession, even Houston is showing signs of financial wear and tear. With sales tax and other revenue falling, the city has virtually depleted its reserves. Parker projects a budget deficit of $146 million in the fiscal year ending June 30.

With growing pension obligations, the city has been issuing about $20 million of bonds annually to cover the costs. Under Texas law, cities can issue bonds without taxpayer approval to cover pension costs, but Houston still had more than $1.8 billion of unfunded pension liabilities at the end of October.

The economic stress has not threatened the city's general obligation credit ratings of AA from Standard & Poor's, Aa3 from Moody's Investors Service, and AA-minus from Fitch Ratings.

"The impact of the national recession was late to hit Houston," Standard & Poor's analyst James Breeding said. "There is also the potential for the area to recover more quickly. Given the resiliency of the Houston economy, including relative home-price and employment stability, the economic downturn should have a minimal impact on management's ability to maintain healthy financial reserves, while also maintaining service levels."

At the heart of Parker's campaign was a pledge to modernize Houston's infrastructure, which would require a commitment to bonding.

"We are seeing that maintaining and upgrading our aging infrastructure is more than just a problem to solve," she said. "It's an opportunity to create good, local jobs that will power our local economy while responding to pressing needs."

Unlike conservative Republicans running for statewide office, the Democratic Parker welcomed federal stimulus dollars, pledging to ease demands on locally generated revenue.

Parker sharply criticized Gov. Rick Perry for rejecting $555 million in federal stimulus money to extend unemployment benefits in Texas.

"In January alone, more than 65,000 Houstonians were unemployed — the most since 2004 — and our economy is slowing," Parker said. "While the governor makes his political point, our local economy is losing out on millions of dollars in stimulus funds — and Houstonians are hurting."

Parker also called on Perry to allow more transparency and local input into decisions about allocating stimulus dollars.

Locally, Parker said she wants to be able to redirect tax dollars now going to tax-increment refinancing zones once the zones complete their project plans. Those tax dollars would otherwise be returned to the city's general fund, she said.

Parker plans an infrastructure audit covering up to 20 years of capital projects needed in the city.

During the campaign, Parker and Locke debated the merits of building a professional soccer stadium near downtown. Parker was lukewarm to the idea. She also criticized Locke's role in the financing of Reliant Stadium, which is home to the National Football League's Houston Texans.

The city has already spent $15 million to acquire land for a stadium for Major League Soccer's Houston Dynamo. White also proposed raising $10 million through a tax-increment reinvestment zone around the proposed stadium site. The Dynamo would contribute $60 million toward financing the stadium, but the city and the team are $10 million short of their financing goal.

While Parker said she supports White's original plan, she has opposed using any city tax revenue for the stadium beyond the tax-increment financing.

Locke — who helped negotiate deals for the Harris County Houston Sports Authority to construct new facilities for baseball, football, and basketball teams — was a strong supporter of the soccer stadium proposal, calling it a generator of jobs.

In reference to reports that Houston might have to tap taxpayer funds to pay off bonds for Reliant Stadium, Parker said: "We need to be doubly sure that the new Dynamo Stadium does not put future tax dollars at risk. The city has already done its part by contributing the land."

Parker's campaign accused Locke of inserting an "obscure provision" into the Reliant Stadium financing documents that left taxpayers responsible for debt service on the bonds. Variable-rate bonds represent about 10% of the Harris County authority's roughly $1 billion of debt for Reliant Stadium, the Houston Astros' Minute Maid Park, and the Toyota Center, where the Houston Rockets play.

"This is a stunningly complex set of interlocking financial instruments, and the problem with any of these 30-year deals is that if you go in the hole early, you cannot get out," former Harris County tax assessor-collector Paul Bettencourt told the Houston Chronicle. "It's time for the Sports Authority to recognize the obvious. Let's get an accounting of what it's really going to cost and take a serious look at shutting it down."

In November, Moody's placed the authority's Baa3 rating on review for a possible downgrade.

Although the Sports Authority is not a city agency, Houston has influence in how it operates. Another entity, the Metropolitan Transit Agency, is also separate, but Parker plans to shake up its board through appointments. As mayor, she will appoint five of Metro's nine board members, providing a strong measure of control.

Parker said she will seek greater transparency as the transit system continues its expansion of rail from the one main line opened several years ago.



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