HOUSTON (CN) — Houston voters must lift a cap on property taxes in November 2017 so the city can start nibbling away at its more than $6 billion pension hole, Mayor Sylvester Turner said Wednesday.
The city paid $350 million in pensions to firefighters, police and city workers in 2015, but its unfunded pension debt is $6 billion and growing — the same problem that bankrupted Detroit in 2013.
The pension crisis is the result of years of city administrations striking deals with police and city workers to pay less into their pension funds than was mandated by state law.
The Houston firefighters' retirement fund is governed by a 1997 state law that requires firefighters to contribute 9 percent of their annual salary to the fund, and the city to contribute at least twice that much.
The spiraling pension fees, combined with a law voters passed in 2004 that caps the city's property tax revenue at $1.1 billion annually, and falling tax revenue tied to the drop in oil prices, have hamstrung Houston's finances so badly that Standard & Poor and Moody's downgraded the city's credit rating in March.
In his first "State of the City" speech since he took office in January, Turner told an audience of more than 1,700 Wednesday at a downtown hotel that the tax revenue cap must go.
He vowed to put the issue before voters in November 2017.
"No other local governmental authority in this state is operating under similar constraints," said Turner, an African-American Democrat.
"I was a part of the Legislature for 26 years, on the Legislative Budget Board from 2003 to 2016, helping to set the spending limits for the State of Texas. No other state, not even the State of Texas, is governed by a similar revenue cap."
Turner last week issued his preliminary $2.3 billion budget for fiscal year 2017, which begins on July 1. The mayor's budget closes a projected $160 million budget gap and reduces spending from 2016 to 2017 by $82 million. It must be approved by the City Council.
Turner, a skilled public speaker who makes City Council meetings feel like he's holding forth at family cookouts, told the audience that getting the city's finances onto a sustainable track will take "shared sacrifice," a mantra he often cites.
"We're eliminating 54 vacant positions, laying off 40 employees and offering early retirement for up to 100 employees," Turner said.
The attrition is nothing new for Houston city workers. Facing the same pension crisis in 2010, the City Council under then-Mayor Annise Parker laid off around 750 employees.
Turner pledged to put a premium on public safety and not lay off any police officers.
His proposed budget includes around $5 million to add another police cadet class, which would bring the total to five, to bolster the department's thinly stretched force.
Houston has half as many officers as Los Angeles, around 5,300, to patrol the city's 627 square miles, which has become a problem as the population continues to grow.
Demographers predict Houston will surpass Chicago by 2025 to become the nation's third-largest city.
Houston's population increased by 145,000 in the past two years, the most of any U.S. city, the Census Bureau reported in March.
Turner said that getting the city's pension obligations under control won't be easy, but outlined his plan to do it.
"There are three specific objectives that I've identified for pension reform: We must reduce unfunded pension obligations now and in the future; the annual cost must go down now and in the future; we must have an agreement by the end of this year for the Legislature to enact in the 2017 session," he said.
Turner said his administration must persuade state legislators to change the pension rules to give the city more say in how they are funded.
The Texas Legislature meets every other year. Its next session starts in January 2017.
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