Networking Luncheon

Transcription:

Chris Hollins (00:09):

Afternoon, y'all. It's great to be here with you. Donna, thank you so much for that warm introduction and to the folks at Bond Buyer, I really appreciate the opportunity to be here with you once again for this year's Texas Public Finance Conference. I'm looking around the room and I've shaken a few hands today and I've seen a lot of familiar faces, but for those of you who I haven't had the opportunity to meet, my name is Chris Hollins and I have the privilege of serving as the independently elected Chief Financial Officer for my hometown of Houston, Texas. As city controller, it's my job to ensure that we're paying attention, that we're serving as the taxpayer watchdog, that Houstonians tax dollars are being spent both wisely and effectively. And then for the others of you who do know me, you know that my team and I are working hard and we're working hard to increase the standards of accountability, of transparency and of innovation in city government.

(01:11):

Despite the emerging financial challenges, my office hasn't hesitated to sound the alarm when necessary, pointing out the implication of things like deficit spending, forecasting the financial consequences of major decisions, or in some cases, indecision and urging policy makers to prepare and plan for predictable scenarios. Now, some of the challenges that we face are those that we inherited and that's common when a new administration comes into office. Others have suddenly emerged, like when the global economy is thrown into turmoil by corrupt and incompetent assholes and still others. We brought on ourselves by not dealing with the reality that we face realities where resources are limited, but needs are not limited. Realities where the services that our residents deserve and demand have a price tag associated with them and realities where there's no magic that suddenly makes money appear or that makes budgets balance that reality requires tough choices.

(02:19):

And when those choices include major changes to city operations, that reality requires leadership and sound management to drive sustainable and lasting change. The outlook from ratings agencies on Houston's general obligation debt have reflected that reality, and I've been unyielding and urging our mayor and city council to share a plan with the public that deals with this reality appropriately and puts us on a path towards fiscal sustainability. In response, the mayor promised that a balanced budget for fiscal year 2026 would be unveiled in just a few weeks, and I look forward to holding him to that. But I'll say my office is committed to transparency, and when we say transparency, what we mean is translating complex financial and operational data into plain English, making it relevant in the lives of Houstonians and putting that information directly at their fingertips. Every taxpayer should be able to know what they're getting for their investment in our city, and they shouldn't need an advanced accounting degree or really even a high school diploma to be able to understand these numbers and what they really mean.

(03:32):

And so we work to develop insights that the public can digest and that city council can use to do something about. A recent example is our analysis on the city's overtime spending, which was more than double what was in the budget. Now, on one hand, a city council member called those numbers bleak, and another's reaction was that my stomach hurts. But on the other hand, one council member said that it's time that we start telling the truth. Another said, we have to change our strategy based on this. And then yet another said that it made him want to drill down more on mitigating actions on the operational side. And that was exactly the point, presenting this problem in a way that city council could understand and giving them both the opportunity and the mandate to do something about it. And now the ball's in their court.

(04:29):

On the innovation side, some of you have heard me say that in the public sector, oftentimes innovation is just doing something smart that the private sector has been doing for 20 years. At the city of Houston, at least in one instance, innovation has meant simply catching up to what other responsibilities other responsible cities have been doing for a really long time. And so one example is our newly released er, our popular annual financial report. Now, I'm sure that each of you know and love the city of Houston's annual comprehensive financial report, our er. I know you take it with you to bed on trips and so on, but you all, you have to admit or a special breed, the average Houstonian can't make which way out of a 358 page dense report and don't walk away from it with any true understanding. And so that's why something like the PATHER is so important.

(05:30):

It's a quick, simple, visually appealing reference guide that can give residents the gist of the city's finances and operations in just a couple of minutes. And again, sadly, this is not some new thing. GFOA has been encouraging major cities to produce documents like this since at least 1991, but until this year, the year of our lower 2025, the city of Houston had never one, and we were the largest city in the country that wasn't producing one, but now that's changed. We're proud to bring Houston's financial reporting practices into the 21st century with this edition, and we'll continue to produce the PATHER on an annual basis going forward. Now, switching gears a little bit. Last year on this very stage I spoke to you about the troubling hypocrisy coming out of Austin, specifically related to Senate Bills 13 and 19. Unfortunately, I'm here with a similar message.

(06:32):

Only this time, the attacks on responsible governance and economic freedom are gaining momentum, and Governor Abbott has even more allies pushing this troubling agenda. SB 13 and 19 are more than symbolic. They carry real operational and economic consequences for cities like Houston. These laws restrict our ability to work with the most qualified and capable firms, increasing costs and limiting the tools that we have to serve our taxpayers effectively. It isn't just bad policy, it's bad business. And what we're witnessing today is an expansion of that trend. What we're seeing across the country is a coordinated attack on diversity, equity, and inclusion fueled by national politics and rooted in a fundamental misunderstanding of what these efforts actually do. Since Trump has taken office, the playbook has been clear rap harmful policies in the language of protecting values while undermining the very principles that they claim to stand for.

(07:38):

First, back with SB 13 and 19, it was about protecting guns and oil and gas. And I want to be clear, oil and gas is critical to the Houston economy, but we know that demand for production is projected to go up over the next few decades, not down even in very aggressive climate scenarios. So what are they actually protecting? The answer is nothing. What they're doing is attempting to stifle innovation in ways that hurt America only to get a few more likes on truth, social and to own the libs. And so now that new rallying cry is meritocracy, the argument goes that firms should ignore generations of systemic inequality and that they should also ignore data. Data that shows that diversity drives better results in both the private and the public sector. So let's be a hundred percent clear here. We should absolutely seek to put the most qualified people in positions of leadership.

(08:40):

But let's also be clear, that's absolutely not what's happening in Washington right now. On the other hand, efforts at diversity equity inclusion are not about giving out handouts. They're about removing barriers so that everyone has a fair shot. Businesses, schools, other organizations, you should not feel threatened for wanting to reflect the communities that you serve, but you're being threatened and all of society is watching to see which one of you will stand up for your values and for what is right and to see which one of you will fold in a misguided attempt at self-preservation. I'm watching that too. At the same time, we're facing another threat. The potential repeal of the tax exempt status of municipal bonds. This move would have enormous consequences for cities like Houston. So let me break it down for you. I know that y'all don't know anything about this subject of municipal bonds.

(09:39):

Municipal bonds are one of the most important tools that we have for funding major infrastructure projects, public safety roads, water systems, schools. If Congress repeals the tax exempt status of municipal bonds, it would drive up borrowing costs for the city of Houston by 15 to 20% at a time when one out of six general fund dollars already goes to debt service. So if that happens, it means fewer dollars are going to critical city services and more are going to interest payments. It means more pressure on property taxes. It means Houstonians will be paying more for less. It is almost like an unnecessary tariff coming out of nowhere for no reason.

(10:26):

This is coming from the same party that claims to be fiscally conservative. It's coming from the same party that says that we want to save taxpayer money. But these actions tell a completely different story, undermining efforts at a fair shot for all, driving up the cost of city projects, abandoning free market principles, and threatening to gut one of the most critical financing tools available to state and local governments. These moves are not about good governance. They're not about fiscal responsibility. These are political stunts with real consequences for real people. And let me be even more direct, Houston does not have the luxury of an action. We must invest in public safety. We must invest in improvements to infrastructure. They're not optional. These are essential to our residents safety, our residents quality of life, and they're essential to the long-term economic growth of our city, our region, and our state.

(11:26):

At a time when families and businesses continue to grapple with rising costs from groceries to housing, the last thing we need is for government to make things worse by increasing the cost of critical services and investments. So my message is simple. If you care about fiscal responsibility, if you care about economic opportunity, and if you care about the future of cities like Houston, then it's time to stand up to policies that are not only shortsighted, but deeply damaging. And if you've been following Houston's financial situation, you're already aware of what it's going to take to address our current tab and water and wastewater. The land area that our distribution systems cover is nearly 600 square miles. It's if you combined Miami, Cleveland, Denver, Baltimore, Boston, St. Louis, Pittsburgh, and DC altogether, that is a big deal. The official estimate for revitalizing our wastewater system under the consent decree that we find ourselves in is $9 billion.

(12:36):

And I've heard unofficial estimates of 12 to $15 billion. It's a massive undertaking, and it's going to require support from investors and people in this room to make it happen, not only to secure the necessary financing, but to craft realistic solutions that won't overburden. Houston residents. Our combined utility system will be go into market with an issuance in Q3 of this year to start putting a dent in the necessary work under the consent decree, but also to address deferred maintenance at the Northeast water plant and installing manhole monitors that will allow the city to respond to disruptions in the future more effectively and more quickly. Houston is also making tremendous strides and expansion that will allow our city to be recognized even more on a global stage. We're looking to move this quarter on an airport issuance that will accelerate modernization at both hobby and Bush airports.

(13:31):

And in the fall, Houston first will do a current refunding to support a billion dollar expansion of the George R. Brown Convention Center with new money issuances to follow and calendar year 2026. We're also in the process of a municipal court expansion, increasing the capacity of our courts, as well as security and efficiency measures for those who are doing business with the city. We're looking toward a CP takeout of general obligation notes in Q3 to coincide with that court expansion project. Now, I want to end on this, although I've raised serious concerns today, realistic concerns, Houston remains a city of growth, of resilience and of opportunity with major events like the 2026 World Cup on the horizon, and a strong record of welcoming visitors and businesses from across the globe. Houston continues to show that we have the resources, the talent, and the drive to stand alongside the most respected cities, not only in the US but around the world.

(14:34):

As a fourth generation Houstonian, I want my kids and I want my kids kids to live in a city that's thriving, a city that's financially sound, a city that's forward thinking, a city that's full of opportunity. That means we need real solutions, sustainable revenue, local decision-making, fiscal accountability, and smart investment. In our future. My office will continue to keep its commitment working every day to ensure that our tax dollars are used wisely, that we're tackling important issues, and that our city is worthy of your trust and your investment. I'll continue advocating for policies that reflect the best interest of Houstonians, not political agendas, and we can make Houston a place where opportunity is not just promised but delivered. And so I want to thank you for your time, for your partnership, and for your commitment to our city. Let's keep building a brighter future for the city of Houston and for the state of Texas, and let's do it together. Thank you all.