June Cover Story 2010
Council Member Stephen Costello Talks About Infrastructure Funding in Houston and the Renew Houston Referendum.
Our guest speaker this month was Houston City Council Member, Stephen Costello, and his topic of discussion was the newly proposed street and drainage funding referendum that is being rolled out by a group calling themselves Renew Houston.
To start off the discussion the Council Member stated that he wanted to give an overview of the problem followed by a description of what Renew Houston is. Costello began with a power point presentation that he has been showing to the general public at town hall meetings around the city. The Council Member stated that during his campaign for Council, his primary issue was the setting up of a dedicated funding source for streets and drainage, and this is a continuation of that effort.
The Council Member informed the group that the City of Houston is growing, and according to the Houston-Galveston Area Council (H-GAC) estimates there will be approximately 2.8 million residents living in Houston in the next 30 years. This will place a growing demand upon our drainage and our streets as the city changes, becoming more dense, to accommodate this many new residents. According to H-GAC models, the city should continue to increase in density within the 610 loop and eventually expanding out to Beltway 8.
Looking at the age of our infrastructure, the Council Member said that over 60% of our city was built prior to World War II. This means that our existing infrastructure is between 50 to 70 years old. “That figure is profound in terms of the challenges that we have to reinvest in our community” said Costello. That figure has a direct impact on quality of life, public safety and most importantly economic development. Areas such as West Houston, Clear Lake and Kingwood are all considered the “new” parts of the city but their infrastructure is at least 30 years old. Looking at the City of Houston’s accounting system, the city back in 2006 estimated that its street and drainage infrastructure was valued at just over $11 billion. In that report the city breaks down the infrastructure by age into seven year increments. According to the Council Member, the interesting thing to note is that infrastructure rated at 16 years and older make up $7 billion of the total amount. That is 64% of the existing infrastructure that is either at or beyond its useful life.
The general public today expects more for less from its city. According to Costello, residents want good streets, good drainage, less wear and tear on their cars but they do not want to pay for it. If you look at where public funding has been going over the years relative to infrastructure versus public safety, you will see that public safety has been steadily climbing while infrastructure has been declining. The study reflects spending in the city since 1945.
According to Council Member Costello, the City finances its infrastructure construction through the issuance of bonds. The City typically issues a new bond letting every five to seven years. In 1991-92 the city sold a little over $300 million worth of bonds, which averages out to $50 million a year for streets and drainage. In 2003 the City sold over $450 million worth of bonds.
Current funding for City streets is broken out as follows: $70 million annually comes from debt financing, $55 million in CIP money, Metro and an additional $33 million from Metro for maintenance agreements. According to Council Member Costello, much of that money will not be available in the near future. Costello stated that of the $70 million in debt financing, the City gets most of that money from TxDOT. Costello said that it is common knowledge that TxDOT has no money and that Houston will not be getting that money in two more years. Combine the two Metro funding sources and it comes to $88 million, but by 2014 the contract that the City has with Metro will expire and so there is a likelihood that those funds will no longer be available. Looking at the drainage side, it is safe to say that drainage has been historically underfunded said Costello. In 1991 the city spent less than $10 million a year in drainage improvements. Now the city spends $58 million annually for new construction. However, that $58 million comes from a storm water fund that the City created three years ago to fund four years worth of construction, and the City will then spend 25 years paying for the bonds. Next year that $58 million will be gone. There is also an additional $34 million used for maintenance. That money is taken out of the water and sewer enterprise fund for drainage maintenance. Now that the City has changed its water and sewer rate fund that money should stay in that fund, stated Costello.
Council Member Costello took a moment to point out that Mayor Parker is viewed by most people as a community person, however she is actually an infrastructure person. The Council Member stated that for City Council to pass a water and sewer rate change that moves the city to a best practices form of financing is beyond imagination. Otherwise, according to Costello, the City would be spending less than $160 million a year on capital improvements for water and sewer. Now with the change the City will be doing $370 million every year on these services.
Renew Houston is a public awareness campaign and petition drive to establish a dedicated funding source for streets and drainage. The City already has this for their water and sewer and this has been long needed in the City for all utilities, said Costello. Drainage and streets are funded through the City’s general fund. If you look at what comes out of that fund you will see that over 65% is for public safety. What that means according to the Council Member, is that everything else that the city is doing, is competing for the remaining 35%. That includes parks, solid waste, housing, libraries, social service programs and finally streets and drainage. According to the Council Member, when it comes time to fund these programs, there is no one at the table advocating for streets and drainage so it gets taken from there for the benefit of another department.
Taking a look at the financing of the Renew Houston program, it is like a three legged stool with three different funding sources. There is the adoption of a minor development impact fee for mitigation in terms of drainage. There is a storm water user fee for everyone, and there is a pay-as-you-go plan for the city. What that means is that we are requesting that the city take all of the existing debt service they have in streets and drainage, which is about $160 million, and move it into this program making it as a dedicated funding source. The money would continue to be used to pay off the bonds, but once the once they are paid off, we would reclaim that money for capital improvements. In years past the City didn’t do that said Costello. As the bonds amortized they sold more bonds, keeping the amortization schedule flat. This will claim about 55% of the total funds. The storm water usage fee will be about $5 per household and will vary between commercial to multifamily and size of the property. According to Costello, several years ago then Mayor Lee Brown tried to pass something like this that was coined “the rain tax”. The reason it was called that was because it wasn’t allocated by size of drainage area or percent impervious property and it didn’t have a plan. We are currently doing a detailed study of all of the drainage projects in the city, prioritizing them on a needs based system. The city is also doing a paving assessment program for every street in the city, said the Council Member. The city has a vehicle that can drive down the road and measure the deflection, the cracking and does a video of the drainage area. This information is rated by a national standard and prioritized by need. This information combined with the drainage assessment study will form the plan that the Brown administration did not have. Costello also noted that another major difference between this plan and Mayor Brown’s approach is that they are doing it from the grass roots up aspect with a petition drive and a subsequent charter change amendment vote in November. This will let the public decide if they want to fund this program.
The City of Houston has three programs that we fund street and drainage improvements with; one is capital improvements, two is neighborhood street reconstruction program and three is local drainage projects. The CIP is for large projects. The neighborhood street reconstruction fund is for citizens to petition the city to replace their residential roads. According to Council Member Costello it takes the City, on average, twelve years to get that accomplished. The Council Member stated that the problem is not due to a lack of competence in the city but a lack of funds and a waiting list that is as long as your arm. The local drainage program is for neighborhood calls on small, broken pipes or inlets and stated these projects can take anywhere from several months to several years to repair. The City of Houston cannot allow its core services to crumble into disrepair and these types of examples cannot continue if we are to continue to be a competitive city.
The Council Member stated that what he is doing here is getting the message out, to tell what the problem is and to say to people that we, as a community, need new funding sources for streets and drainage. We need a dedicated funding source for streets and drainage and we as a community should not accept waiting twelve years to get things done. We have to re-invest in our community, and according to Costello, we should be the first major metropolitan city in the country to re-build its infrastructure and do it in thirty years.
