Noteware: Ballot deception: When it rains, it pours

Rain Tax ballot

One of the recurring themes since my first columns were published by the HBJ has been that City leaders have not been telling the full truth about important issues. Indeed, my early columns specifically called attention to City leaders who have been deceiving citizens about the perilous state of municipal finances by omission – that is, by selectively trumpeting some facts (such as the area’s recent rapid growth) while burying inconvenient details (such as the City’s deficit spending and flat population and employment levels) in technical reports few citizens read. As a result, most Houstonians are puzzled when they hear that the City is struggling to balance its annual budget, that it effectively has no rainy day fund despite years of alleged success, and that there doesn’t seem to be any money to repair the city’s proliferating potholes.

I continue to call attention to these issues because I believe they threaten Houston’s existence as the area’s commercial/civic hub. Furthermore, I believe that Houston business leaders can bring needed leadership and accountability to government agencies that, increasingly, seem to have gone off track. Area business leaders frequently stop me to discuss these columns, and to share their own concerns about problems with local governance and government.

The most pointed criticism of the deceptive behavior of local political leaders I have seen in years, however, comes from none other than the state’s highest court. The Texas Supreme Court unanimously rejected the ballot language of the Charter Amendment for the “Dedicated Pay-As-You-Go Fund for Drainage and Streets” – the enabling act for the “Rain Tax” or Rebuild Houston, as it has been called.  This is a stinging rebuke to the City’s leadership and its communication with citizens.  In his opinion, Justice John Devine concluded that the City “failed to substantially submit the measure with such definiteness and certainty that voters would not be misled.” In her concurring opinion, Justice Eve Guzman went further, declaring that the “City’s semantic obfuscation is particularly egregious….”

The consequence of the City’s actions – assessing fees to be paid by confused citizens – has now cast significant uncertainty over the City’s drainage operations and improvement plans and over the City’s finances, when both are in deep trouble.  Many Houstonians are still reeling from the effects of flooding from Tropical Storm Bill, with hurricane season just ramping up.  Meanwhile, City Council passed the budget for FY 2016, to begin July 1 – once again, only in balance due to borrowing.  City Council did not acknowledge the Court’s ruling – or the possibility that the Rain Tax revenues might not be collectible.

The Texas Supreme Court found that the ballot language obscured understanding of what would become the Rain Tax drainage fee.  (In other words, voters approved a program without knowing that they would pay for it – or how much.  This is the program’s revenue, known as the “Dedicated Drainage Street Renewal Fund” (DDSRF). It is thus worth noting that the City’s drainage program resulting from the Charter Amendment authorized by a narrow majority of citizens voting in 2010 has been marked by confusion (to be generous) or deception (to be less generous) from the start.

Observers may recall that City officials initially attempted to assess the fees on all owners of property based on “impervious” surface (parking lots) — that is, with the types of surfaces causing the most runoff. But, the opposition of traditionally tax-exempt properties – churches, colleges, other governmental agencies, etc. – was swift and strong.  The City immediately retreated and then assessed fees to property owners more along the lines of traditional property taxes.  Next, City officials told taxpayers that fees would run roughly $5.00 per month for an “average” property — only to acknowledge a short time later a calculation “error,” raising the assessment for an “average” property to roughly $8.00 monthly. Then, City officials again retreated to the $5.00 per month fee for an “average” property by exempting some “impervious” areas.  Mistakes simply happen, citizens were assured, but City officials “corrected” them and the massive new revenue program moved right along — until the 12 June 2015 court decision.

I am not aware of other instances of a state’s highest court so thoroughly rebuking a municipality’s leaders for effectively trying to deceive citizens/taxpayers about the nature of a referendum that would create a large new “dedicated” revenue source for certain capital improvement projects. But it gets worse! Beyond the revenue generation side, which was the sole issue before the Texas Supreme Court, the City’s leaders have also misled (and continue to mislead) citizens/taxpayers on the expenditure side. That will be the subject of my next column.

When it Rains, It Pours.

A version of this article was submitted to the Houston Business Journal in July 2015.

Jim Noteware
About Jim Noteware 18 Articles
Jim Noteware is a Houston-based real estate developer, focusing on suburban master-planned and urban infill communities. He also specializes in the turnaround of distressed properties, portfolios and organizations. He has served two big-city mayors, in Houston and Washington, D.C., working to improve the performance of large troubled public agencies.