Houston taxpayers spent over half a million dollars for a private consulting firm to make recommendations to the city on best budgeting practices, cost reductions, and ways to increase revenue. In addition to the colossal amount spent on the firm, some of their suggestions could cost taxpayers even more on the front end.
One concerning example was the report’s recommendation on how to handle employee vacancies in the police department. In fiscal years 2011-2012, there were significant reductions in full-time civilian employees and, consequently, uniformed officers began filling those positions. However, in 2016, the Houston Police Department returned to hiring civilians for administrative roles, freeing up uniformed officers. Public Financial Management Group, PFM, recommended continuing this trend but stated that, “In the short-term this will not result in savings due to backfilling the administrative positions with civilians. The estimated impact will result in a cost increase of $4.7 million in FY18.” So while no savings are identified, the upfront costs are pretty staggering.
What’s concerning about this approach is the department is just refilling civilian positions that it laid off during budget downturns. If the city sees a downturn in future years, civilian HPD employees will likely be some of the first in the department on the chopping block, leading to uniformed officers once again having to fill these positions.
For budgeting practices, the PFM report suggested a change from the city’s incremental budgeting scheme to an outcome based method.
The current process, incremental budgeting, uses the previous year’s budget as a baseline and adds to that. The newly proposed method would require the city to develop a budget based on the next year’s goals. Though PFM claimed this is a step towards a structurally balanced budget, there are no identified savings.
More importantly, by using this new method, the city and its departments can justify budget increases by claiming lofty goals for the following year. If they truly want to produce savings and balance the budget, they should move to a zero-based budgeting model and require department heads to justify every cent requested for every budget cycle.
PFM also recommended that the Houston Fire Department pursue EMS collections and fee increases. The current collection rate falls between 38-40 percent while the national baseline is 44-56 percent. The department is presently working on a proposal to adjust the current fee and also include options for additional fees, which would reportedly generate between $3-5 million in 2019. The city should consider privatizing its EMS and debt collection services. The responsibility for debt collection would shift and a private entity would have profit motive to pursue outstanding bills from those utilizing EMS services.
The last, but not the least, of the concerning recommendations is a revision to the fire alarm fee schedule.
Chapter 11 of the city code provides a schedule of how much the city charges for responding to a false fire alarm. The current rate is $360 after the fifth, fifteenth, or thirtieth time depending on the class of the permit holder. PFM’s recommendation is to increase that fee to over $400 and increase the late fee as well.
Interestingly, PFM cherry-picked a few cities to show that Houston’s fire alarm schedule was cheaper than other cities. Yet instead of using cities of relative population, like Chicago and Philadelphia, they chose cities like San Francisco, San Diego, and Plano. In comparison, Chicago charges a flat fee of $100 for each false alarm while Philadelphia doesn’t charge for the first two false alarms and then only a $75 fee for each after that.
Houston should consider contracting with a private company, like Texas-based PMAM. PMAM allows applicants to apply for permits online, and it will track, bill, impose, and collect fines and fees for various government entities, particularly fire departments. Pittsburgh, PA; Oakland, CA; Keller, TX; and Durham, NC, to name a few, all use PMAM for their services.
Fines and fees should serve to recoup the costs for the services deployed, not as a revenue generator. The PFM recommendations seemingly attempt to do the latter.
There are positive recommendations to be found in the report, though. Houston implemented a “staff efficiency assessment” or vacancy control to help be mindful of its fiscal position when filling vacant positions. This vacancy control has reportedly saved taxpayers $5.8 million since the program began, and is expected to save between $1 and $2 million next fiscal year. Another positive recommendation is closing inactive special revenue funds, like the Tropical Storm Allison Disaster fund, and recouping that money. This change is expected to recover $13 million.
As a whole, city officials should be focused on implementing stronger controls on city spending, not finding new ways to increase revenue. No amount of property tax, or fine or fee revenue will quench the government’s ever-growing thirst for tax dollars; the only option to attain long-term financial solvency is a further reduction in spending.