July Cover Story 2010

City Controller, Ron Green Talks About the City Budget and Duties of His Office

The Houston Contractors Association was pleased to welcome Mr. Ronald Green, Controller for the City of Houston, as our speaker at this month’s membership luncheon. Controller Green is no stranger to the association, having successfully served as an At-Large City Council Member for three terms.  Controller Green recently stepped into his new position previously held by, Mayor Parker.

Controller Green thanked the audience for letting him speak today and stated that he had only been in this position for six months now, but that he was focused on improving the system and getting people more involved.  He stated that he would put a new emphasis on letting people know what it is that the City Controller’s office does. Mr. Green stated that his office is not just about payments for contractors.  Most people out there do not know what we do stated Green.  “Although I am no longer on the Council side there are still services my office provides and ways that I can assist you.”

Mr. Green spoke about the relationship between the Controller’s office, the Mayor’s office and City Council.  Mr. Green stated that the transition over from Council to the Controller’s office was an easy one for him since he was chair of the Council Finance Committee and gravitated toward financial issues while on council.  As an At-Large Council Member, you don’t have a district to worry about so you can concentrate on bigger issues, it is the same in the Controller’s position.  Controller Green stated that one difference between the two offices is that here he does not have a vote on issues.  This is not a bad thing said Green, it meant that I didn’t have to vote on the water rate increase that recently passed, Green said jokingly.  The Controller then stated that he agreed with the increase saying that we need to pay for infrastructure and this was a needed increase.  He assured those in the audience that as an elected official he has to live in the City and has to pay the same taxes and live under the same laws as everyone else.  As an example he showed a parking ticket that he received prior to this event showing that he gets treated just like anyone else. 

Controller Green stated that at the City, June 30^th was the end to the fiscal year and that council has already adopted the FY 2011 budget.  The budget, according to the Controller, was increased somewhat, but is still a workable budget sitting at around $2.1 billion on the general fund side.  The CIP has another $2.1 billion for a total budget of $4.2 billion.  That is a big deal said Green and my office wants to make sure that you get a fair value for the money you are paying into the system.  Looking at the relationship between the Controller and the Mayor’s office, Mr. Green stated that his office is the more conservative office when it comes to financial projections for the city.  “My office will not book the funds or transaction until we receive the check.” The administration’s role is to plan, said Green, to plan out and determine where they think the money will come from.  According to the city Charter, the budget will be balanced, but it is my office that sometimes has to give the bad news.  Controller Green used the example of land sales that the Mayor’s office says will bring in $22 million this fiscal year, he disagrees that they will bring that much in the current economy.

The good news according to the controller is that we are finally starting to see an uptick in sales tax revenues.  Mr. Green stated that for those who are not familiar with the breakout of where the city gets its funds, about 60% comes from property taxes.  The Controller stated that most of the property values in the city declined this year reducing the funds available to the City.  Sales tax has been down for the past year, however this is the most elastic part of the city’s budget.  Mr. Green stated that he was concerned about the BP oil spill in the gulf and the economic affect that it will have on the area.  He stated that we will see a downturn in the oil and gas business, but we will probably fare better in the long run than most areas because that is what we are built on in Houston.  With an increase in sales taxes starting to be realized, this will go a long way in helping the city hit its budget and reduce the number of things that will have to be cut at the end of the year if the economy does not pick back up.

Controller Green next explained the roles that his office plays in the City.  He stated that while he does not vote on specific projects, he does certify that each project has the funding to proceed.  Once funding is approved, then it is voted on by Council for final approval.  The controller’s office from there makes sure that your checks are issued out on a timely basis, usually about 30 days from submittal.  Controller Green stated that he is working on a new project that will allow the city to do direct deposits into contractor accounts.  The city has already started this process with about 15,000 city employees.  The Controller’s office is currently encouraging contractors to sign up for the automated vendor payment program.  By doing so it will speed up the payment process and get you your money faster, said Green.  This process also frees up the city because now they don’t have to worry about lost checks or fraud and saves the city money by making the process paperless.

There are other divisions within the Controller’s office that handle things other than payroll.  According to Mr. Green the treasury division has about $13 billion in debt that it oversees.  This is the money that is used to cover the CIP, stated Green.  This department is tasked with overseeing the debt and finding ways to reduce that number.  On the investment side, the Controller’s office oversees approximately $2.2 billion worth of investments which are all overseen by in-house personnel. Even without using an outside consulting firm, this group has been showing a decent profit of about 4%.  The auditing division oversees process and financial audits of city departments and departmental policies.  This practice of internally auditing city policy has been very beneficial and has saved the city both time and money. The order of the day in the City of Houston is becoming more efficient, finding ways to save money and more effectively delivering services.  According to Controller Green, there are still a few more financial quarters out there where the outlook will not be good, and while Houston will fare better than most other cities, we still need to be prepared.  The good thing is that the City has forward thinking people who are putting plans in place.  Departments are right-sizing, going through to see if they have the appropriate staffing levels, if they are hiring in the right areas, and if personnel can be better utilized elsewhere.  The Controller stated that there was no direct hiring freeze at the city, but that positions are being reviewed to determine the necessity of replacing that individual, or whether it should be left vacant.  Positions are being deleted through attrition said Green.

Looking to the future, Controller Green stated that Houston is still growing, we expect the economy to get better, and there are more people are moving here than ever before.  According to statistics from the U-Haul Corporation, more people are doing one way truck rentals to Houston than any other destination in the country.  That is a good economic indicator for the city, said Green.  For the contractor that means that the city is going to have to grow to keep up with this expected influx of residents.  That means more roads to build and more infrastructure to put in place to keep up with all this new growth. 

July 2010 V.P. Report

Cayman Islands Management Trip

I would like to thank everybody who attended this year’s management conference at the Ritz-Carlton hotel in the Cayman Islands.  This was a wonderful resort located on the white, pristine beaches of a beautiful tropical island, making it impossible for our members to not enjoy themselves.  A special thank you goes out to our management sponsors, without whose help we would not have been able to put on the wonderful event; Cherry Companies, Rush Equipment, ACT Pipe & Supply, The Sprint Companies, Williams Brothers Construction, Century Asphalt, Oldcastle Precast, Insurance Alliance, WM Trucking, Waukesha-Pearce Industries, and Rinker Materials/Cemex.  Thank you for your generous support.

Every management trip has a featured speaker for the event.  This year Mr. Stephen Sandherr, Chief Executive Officer for the National AGC was our keynote speaker and gave a detailed presentation on what to expect from the Federal Government relating to utility construction over the next several years. A brief summary of his comments would have to be; hold on to your wallets because it is going to be ugly.  According to Mr. Sandherr contractors can expect to see increased material prices on diesel, steel and cement, not to mention drastic changes to your healthcare policies.  According to Mr. Sandherr, the Obama administration is looking to implement many of his changes through departmental regulations rather than through legislation.  Expect to see the power of the EPA expanded and their enforcement of regulations increased.  There will be a push to have the EPA begin issuing all building permits and act as a transportation planning agency.  And if the thought of the EPA acting as a national urban planner and permitting agency doesn’t scare the pants off of you, how about if I add OSHA to the mix.  Mr. Sandherr stated that the Obama administration is empowering OSHA and encouraging more aggressive inspections of worksites and offices.  Issues that are on the OSHA agenda will be things such as ergonomics, silica exposure, safety and confined spaces issues.  Now here is the scary part, Mr. Sandherr said that this country is one accident away from the “Protecting America’s Workers Act”.  This is a union driven program that would increase civil and criminal penalties for OSHA violations, has the potential for criminal liabilities for officers and directors of companies and would require that any discussion of settlement would have to include the victim, victim’s family or a union representative.  The act was filed back in April of 2009 and is currently being reviewed in the House by the Health, Education & Labor Subcommittee. 

Mr. Sandherr also discussed an issue referred to as High Road Contracting.  This is another union backed program that would change federal procurement rules and combine the living wage concept with blacklisting rules.  Under this proposal the Federal Government could give preferential treatment to contractors that pay a “living wage” and provide other benefits such as healthcare and retirement packages to their hourly employees over those companies that do not.  This action would clearly favor unionized companies and punish open shop facilities.  The proposal would also allow for blacklisting of non-participating or “bad guy” companies.  Discussion of this program was reported back in early February but so far has not seen much daylight, probably due to the problems that Card Check, another union backed policy, has faced in the Senate.  And you thought that the healthcare debate was a problem.

Soft Economic Outlook

The Greater Houston Partnership put out numbers for May for the Houston area showing growth for the fourth consecutive month.  The region gained 20,200 jobs in May, a .8% increase over the previous month.  Half of the jobs created occurred in the Federal Government, census worker positions, however private sector employment grew by 10,800 in May and has increased by 31,000 since January.  All employment sectors added jobs, however they are all down from this same time last year.  In May the construction sector added 500 jobs.  This is only the second month in the last 24 where employment has not fallen.  Manufacturing added 1,100 jobs but remains 8,000 below the May 2009 numbers.  Likewise retail added 1,200 new jobs, but is still 1,400 below this time last year, and wholesale trade is still down 4,000 jobs compared to 2009.  On the bright side the numbers are considerably better here than they are in the rest of the country, and the positive growth is not just in Houston, but in every metro area of Texas.

While the employment growth numbers for the region are not great they are still in the positive.  The area unemployment rate for May is at 8.3% dropping only a half of a percentage since January.  The unemployment rate for Texas stands at 8.0% and the national figure is 9.3% for May.  The national number fell in June to 9.5%.  According to a report from the Associated Press, the private sector nationally only added 83,000 jobs in June and estimates that approximately one half million people have stopped looking for work altogether. 

Experts said that the U.S. economy will need job growth at an estimated rate of 200,000 new jobs per month to begin to affect the unemployment rate, and nobody expects that to happen anytime soon.  According to the report, the government has mostly exhausted its options to affect the economy.  Interest rates are already near zero and there is little political will to push for another stimulus package, even amongst Democrats.  National unemployment rates are expected to stay above 9% through the midterm election in November and the Federal Reserve predicts that the jobless rate could be as high as 7.5% two years from now. 

American confidence in the economy is fading as well, creating a vicious cycle of slow job growth and a lack of consumer confidence.  In June the consumer confidence rating was at 53, down ten points from the previous month and well below a typical reading of 90 seen in a healthy economy.  Most big companies are reporting that they expect little to no job growth in the second half of the year, blaming weak demand for products. 

Where is Gordon Quan?

I was talking with some other political pundits recently when the topic of the Harris County Judge’s race came up.  We discussed the race and the candidates.  There were one or two in the group that didn’t know who the Democrat party candidate was, a good sign for Judge Emmett I must say.  I reminded them that Gordon Quan was Dem. candidate, but followed that up by saying that no one has seen or heard anything from him since the official announcement back in January.  Granted, campaign season doesn’t really get going until after the summer is over, but we still should be hearing something about him.  Well now I know why, Gordon Quan had multiple bypass heart surgery in late May.

Found only in a few obscure blogs buried in the web was a short interview with the candidate where he stated that he had known about the heart disease for some time, but decided to have the surgery now to recover in advance of the fall campaign season.  Quan, who is 62 stated that he will use the six to eight week recovery time to meet with County employees and study County government issues.  I would have thought he would have already done that prior to filing to run for the office, but that’s just me.  Anyway, let’s all wish him a speedy recovery, a long and happy life and a quick and decisive defeat at the polls come November.  By the way HCA has endorsed Judge Emmett for re-election to the position. Go Judge Emmett!