The following is a guest submission from Bob Lemer. Feel free to submit topical posts/essays for our consideration to [email protected]. As with our usual blog posts, the views expressed are those of the author.
MAYOR PARKER’S DESPOTIC QUEST FOR FREE (FISCAL) REIGN MUST BE STOPPED
by Bob Lemer
My Merriam-Webster pocket dictionary defines a “despot” as: “1. a ruler with absolute power and authority 2. a person exercising power tyrannically.”
Houston’s “strong mayor” form of city government inherently gives the mayor essentially absolute power and authority. And several mayors, certainly Mayor Parker, have exercised that power in a manner bordering on tyranny. Thus, in my view Parker is an aspiring despot.
Like the 18th century American colonists, Houstonians (those who have taken the time to recognize what is going on) have a growing bill of particulars against Mayor Parker regarding her tyrannical form of governance.
But I shall address herein only the following bill of particulars:
- Mayor Parker’s plan to dupe Houstonians into giving up voter control over the power to be taxed (“Prop 1”).
- Mayor Parker’s role in allowing the City to arrive at its current monstrous fiscal crisis.
- Mayor Parker’s plan to dilute or eliminate term limits for Houston elected officials.
1) Mayor Parker’s plan to dupe Houstonians into giving up voter control over the power to be taxed (“Prop 1”)
Parker is going to soon seek mayoral absolute power to assess property taxes. She plans to acquire that absolute power by tricking Houstonians into voting to remove the November 2004 Prop 1 amendment from the city charter. Prop 1 was overwhelmingly approved by Houstonians and currently gives the voters, rather than the mayor, control via a very simple and reasonable cap (combined growth rate of population and inflation) on the City’s annual total property tax revenue. Right now the cap can only be expanded in any year by advance voter approval.
If Houstonians vote to remove Prop 1 from the city charter, then Parker will have absolute power over your City property tax. That is because Houston operates under a “strong mayor” form of government.
Parker claims that she needs her hands on the power to tax in order to cover the mounting operating expenses of the general fund, where the core mission of the City (such as public safety) is funded.
But Parker conveniently neglects to inform the voters that:
- The City has already continually violated Prop 1’s very reasonable cap of combined increase in population and inflation, for a total violation approximating $1 BILLION. The City has done this by deviously claiming that Prop 1 compliance should be calculated by applying the cap computation to budgeted rather than actual property tax revenue. The City, quite predictably, commenced, beginning with the first effective year of Prop 1, conveniently and significantly under budgeting property tax revenue. Like Pinocchio’s nose, the annual rate of under budgeting grows greater each year, to where it is now in the range of 10%. That is how absolute power works. One need only lie.
- In spite of collecting property tax revenues of approximately $1 BILLION in excess of even the very reasonable Prop 1 cap of combined growth in population and inflation, the general fund balance is in danger. In fact, the general fund balance would have disappeared long ago had the City not propped it up by borrowing over $600 million in pension plan bonds.
- The general fund balance’s precarious position, in the face of the $1 BILLION of revenues in excess of the very reasonable Prop 1 cap, is prima facie evidence that the City has a severe structural problem in expenses, and not in revenues.
- Looming over this whole general fund problem is the specter of over $5 BILLION of unfunded pension plan and health care plan liabilities. Most experts believe the $5 BILLION is greatly understated. It is very obvious mathematically that even if the $5 BILLION is correct, the City still cannot come even remotely close to solving that problem with a current budgeted general fund revenue level of a little over $2 BILLION annually, including around $1 BILLION of property tax revenue. THEREFORE, PARKER WANTS TO GAIN ABSOLUTE CONTROL OVER THE POWER TO TAX AND TAX EVERMORE. IF PARKER OBTAINS THE ABSOLUTE RIGHT TO RAISE PROPERTY TAX RATES OR ASSESSED VALUES CONTINUE TO INCREASE AT THE CURRENT RATE OF INCREASE (a substantial cause is a shortage of properties for sale and not any really significant increase in population), EITHER EVENT WILL ASSURE THE DEMISE OF THE CITY OF HOUSTON, BECAUSE BUSINESSES AND RESIDENTS WILL COMMENCE FLEEING THE CITY IN DROVES. THE ONLY REAL SOLUTION IS TO REDUCE THE OBVIOUSLY OUT-OF-CONTROL-EXPENSES, BEGINNING WITH THE MONUMENTAL PENSION COSTS..
- Mayor Parker has a glaring conflict of interest in trying to solve the pension funding crisis. Parker and all other elected employees are covered by the City’s pension plan. In a 2012 address to city council, the City’s pension officer disclosed that all fully vested employees who had retired were actually receiving much more in retirement than when they were working. So apparently when Mayor Parker retires after her term expires at the end of calendar year 2015, she will receive annual retirement pay (including social security) well in excess of her current $209,138. Interestingly, if she precedes her wife in death, her wife apparently will receive Parker’s full City retirement pay rate until the wife dies. What a deal! No wonder Parker is: (1) so adamantly against converting the City’s three pension plans from a defined benefit basis to a defined contribution basis; and (2) so interested in removing Prop 1 voter control over excessive total property tax revenues (needed to pay her, and other employees’, exorbitant benefits).
- The City’s three pension plans for employees were revised late in Lee Brown’s reign as mayor, to hugely unsustainable benefit levels. It is of interest that Mayor Parker (then city council member chair of city council’s budget and fiscal affairs committee) apparently carried the proposed benefit changes to city council, including the pension plan negotiators’ offer (attempted bribery, in my opinion) of a 2 for 1 credit for years worked by city council and department heads. Bear in mind our elected officials are in the civilian plan. Luckily, the inclusion of city council members in the 2 for 1 deal was ultimately eliminated, but department heads did receive the 2 for 1 deal. So guess what? Parker shortly became a department head (city controller).
- On average, City employees’ base pay is at least equal to the average base pay of Houston non-City employees. Plus City employee related expenses other than base pay approximately equal City total base pay expense. The private sector has nowhere near as high of a burden correlation. Obviously the City’s base pay burden ratio (about 100%) needs to be drastically lowered.
- It is my observation, after about 30 years of observing the City’s budgets that the City’s workforce (civilian and classified) is grossly overstaffed at both the middle and upper levels of management, along with their administrative support staffs. Plus one only has to read recent news to know that the City has very serious inefficiencies and mismanagement.
2) Mayor Parker’s role in allowing the City to arrive at its current monstrous fiscal crisis:
Actually, Parker has not sufficiently earned Houstonians’ trust, regardless of whether we have a strong mayor form of government. In fact, in my opinion, she has violated her fiscal fiduciary duty at all levels in which she has served the City: 6 years as city council member, (including serving as chair of council’s budget and fiscal affairs committee); 6 years as city controller (our directly elected supposed fiscal watchdog for taxpayers); and 4 and 1/2 years as mayor (with 1 and ½ years remaining to serve).
In my opinion, she has seriously violated her fiscal fiduciary duty by:
- Constantly concealing the truth regarding the true drastic fiscal condition of the City of Houston.
- Aiding and abetting the transfer of financial ownership of the City from the taxpayers to the employees, whom she serves as de facto ruler (and shares the same outrageous employee benefits). She has effectively given the City’s employees (of which she is one) the key to the City’s financial vault, when the vast majority of employees don’t have enough loyalty to even live in the City.
Concealing the truth regarding the true drastic fiscal condition of the City of Houston
- Mayor Parker has consistently used the term “Houston” in extolling the dynamic growth of the metropolitan area surrounding Houston, when the City’s own Comprehensive Annual Financial Report (CAFR) has shown very clearly for years that the City itself, unlike its surrounding MSA, is rotting fiscally.
- The City of Houston has had City-wide operating losses every fiscal year since 2002, totaling $2.5 BILLION! In other words, the City-wide budget has NOT been balanced since fiscal year 2002! Houston’s $2.5 BILLION of operating losses exceeds: (a) Detroit’s $1.7 BILLION losses for the same period, (b) the COMBINED total operating losses (actually a net surplus) for ALL OTHER Texas cities; (c) and the COMBINED total operating losses (actually a net surplus) of all the other nine of the ten largest US Sun Belt cities (the other nine includes four California cities!).
- Parker should have been highly able to read and understand the CAFR (and the facts listed in 2 above), (a) beginning with her term as chair of city council’s budget and fiscal affairs committee, (b) even more so when she was city controller in that her city controller department prepared the CAFR and she annually certified its accuracy, and (c) that expected high level of understanding of the CAFR should have even increased when she became mayor and signed off each year as the City’s CEO.
- If Parker has understood the CAFR in her city council, city controller and mayor offices of service and has failed to fully advise Houstonians as to the true and full seriousness of the City’s fiscal situation (not just the pension situation), she has seriously violated her oath of office, in my opinion, and she should be immediately removed from office and dereliction of duty charges filed against her, if appropriate.
- If Parker just did not and does not understand the CAFR, she is unqualified to be mayor and should be removed from office via recall.
Aiding and abetting the transfer of financial ownership of the City from the taxpayers to the employees, who she serves as de facto ruler (and shares the same outrageous employee benefits).
If Parker truly understands the CAFR, she would know the following facts and should have advised Houstonians of such facts:
- In addition to spending the approximately $1 BILLION of revenue not permitted by Prop 1, for fiscal years 2003-2013 the City incurred city-wide operating expenses about $2.5 BILLION in excess of even the disallowable revenues of $1 BILLION. That was financed by issuing over $600 million in pension bonds and kicking the can down the road on the remaining amount principally by underfunding employee pension plans. (This is all disclosed by the City’s audited annual financial statements contained in the CAFR.)
- Thus the City not only spent $1 BILLION of revenues specifically not allowed by the City Charter but also put taxpayers on the hook for another $2.5 BILLION in unpaid operating expenses. It is my understanding that existing law does not allow a municipality to encumber future years’ budgets for current year expenses. But absolute power doesn’t worry about existing law.
- Since most of the debt from operations is related to pension expense, the City has, in effect, transferred financial ownership of the City from the taxpayers to the City employees, the vast majority of whom don’t even live in the City (per the City’s own public records). Absolute power at work again-who is the City employees’ “ruler” (Parker), who gets well over $200,000 per year and the premier 2 for 1 year service credit?
3) Mayor Parker’s plan to dilute or eliminate term limits for Houston elected officials.
Parker’s despotic plan to reduce voter control over property taxes, etc. would be greatly enhanced by weakening or eliminating term limits for City of Houston elected officials. Fortunately for her, the Houston Chronicle and the City employee pension plans are carrying the water for her regarding weakening or eliminating term limits. It also appears that the majority of city council members are in favor of weakening or doing away with term limits, with extended incumbency thereby advancing their careers in public office.
I am sure you have had the opportunity to read the numerous anti-term limits editorials the Houston Chronicle has written over the years.
Regarding the City pension plan and union leaders, in June I was shocked and insulted, quite frankly, to hear the City pension and union leaders, in effect, chastise those of us attending a meeting hosted by the Greater Houston Partnership for permitting Houston term limits. Those City employees had the unbelievable gall to say that term limits were seriously impeding their ability “to get to sufficiently know” (interpret that how you will) the mayor and city council members in order to achieve better pay and fringe benefits.
At some point, voters need to get City employees (most of whom don’t have enough loyalty to even live in the City) to fully understand that the voters, not the employees, should own the City and dictate what happens to this City.
To counterbalance the City employees’ expressed viewpoints and the Chronicle editorials, I suggest you read the term limits page on the website, www.taxpayerokcorral.org.
In short, I believe the US Congress is a living testimonial to the need for term limits, and why 2-year terms are much more needed than longer terms.
Mayor Annise Parker has always viewed voters and any criticism of herself with disdain, like any aspiring despot. So writing this article reminded me of the first of several meetings I have had with Parker. That first meeting, on May 3, 2002, was with Parker and Al Haines (Mayor Lee Brown’s then chief-of-staff). The purpose of the meeting was to serve as a substitute for a meeting I had requested for my group of retired partners of Houston accounting firms with Houston city council’s budget and fiscal affairs committee, of which Parker was then chair.
Parker had refused to permit my group to meet with her committee, which I thought was very odd in that:
- I had advised her that we had a veritable laundry list of fat items in the City’s budget to discuss.
- My group was eminently qualified to dialog with her committee: a) They were all retired partners of accounting firms, and all four of my cohorts had been managing partner of their firm or its Houston office; b) One Democrat in our group had consulted for Republican President Richard Nixon’s Grace Commission; and c) One Republican in our group had consulted for Democrat Texas Governor Mark White’s mini-Grace Commission.
- I had audited or consulted with approximately 100 governmental or nonprofit entities, including the City of Houston, and had closely followed the City’s finances for about 20 years at that time.
Then, as now, Parker neither sought nor took advice.
During that 2002 meeting I asked for her view on the proposed City charter amendment I had written to furnish voter control over total revenues/spending. The citizen-signed petitions for that proposed charter amendment were properly submitted by the sponsoring PAC to the City secretary in September 2001 but at the time of my May 2002 meeting with Parker the proposed amendment was still being stonewalled from appearing on the City ballot. The proposition finally was approved as Prop 2 on the November 2004 ballot. Mayor Bill White’s supposedly opposing (subsequently proven NOT) is the Prop 1 previously discussed in this article. Both Prop 1 and Prop 2 now rest as law in the City Charter. The City totally ignores Prop 2 and, as discussed in this article, fakes compliance with Prop 1. Yes, despotism is alive at the City of Houston!
Mayor Parker’s reaction to my request for comment on what ended up being Prop 2 was, “I don’t know how much democracy I believe in.” She further revealed that she believes the average voter doesn’t know enough to be voting on anything about the City’s finances. But when I asked her, so how does a voter know which political candidate does know what should be done about the City’s finances, she had no answer. ‘Nuff said!
Summary: If the huge fiscal crisis facing this wonderful City of Houston is to be solved, it is absolutely imperative that Houstonians defeat Mayor Parker’s despotic attempts to: (a) remove the November 2004 Prop 1 from the City Charter and (b) dilute or remove term limits for City elected officials!
Lemer is a retired partner of a Big Four accounting firm. He has been the leading historian of the City of Houston’s fiscal and operating performance for decades.