Houston Mayor John Whitmire has found a way to make $50 million sound like free money. The problem is that a large part of the money already belongs to Houston, and in exchange the city would give up a stream of sales-tax revenue that could continue for another three decades.
Houston City Council is scheduled to vote Wednesday on an agreement with The Woodlands Township. Under the deal, Houston would permanently give up any future right to annex The Woodlands, and beginning in 2030, The Woodlands would stop sending a portion of its sales-tax revenue into the regional agreement created in 2007. (Houston Chronicle)
The headline number is $50 million for Houston.
Look underneath the headline.
About $22.6 million is already sitting in the Regional Participation Fund, accumulated from sales taxes over the past twenty years. The agreement would merely remove restrictions on Houston’s use of that money. (The Woodlands Township)
Another $7.9 million consists of sales-tax payments for 2027 through 2029 that The Woodlands acknowledges are already obligated to Houston under the existing agreement. (The Woodlands Township)
That means more than $30 million of the celebrated $50 million consists of money already accumulated for Houston or already scheduled to come to Houston.
The genuinely additional money is approximately $19.5 million, which The Woodlands would pay from its cash reserves. (The Woodlands Township)
And what does Houston give up?
Beginning in 2030, The Woodlands keeps the sales-tax money that would otherwise continue flowing under the existing agreement. The Woodlands itself estimates those future payments will average about $4.5 million a year. (The Woodlands Township)
Houston Controller Chris Hollins calls the proposal a bad deal. His office estimates Houston could surrender as much as $173 million in future revenue over the remaining decades of the agreement. Whitmire disputes projections that far into the future and argues that state law and other circumstances could change. (The Houston)
Whitmire has one good argument. Houston’s theoretical right to annex The Woodlands probably isn’t worth very much today. Texas law now makes forced annexation extremely difficult, and politically the chances of Houston swallowing The Woodlands appear remote. The original agreement already protects The Woodlands from annexation through 2057. (Houston Chronicle)
So forget annexation for a moment and look at the money.
Houston has a revenue-producing asset. The Woodlands is willing to pay to get out of it because The Woodlands expects to benefit financially. Its board approved the agreement 7-0, and its own announcement proudly says ending the payments will give the township an average of approximately $4.5 million annually for its own priorities. (The Woodlands Township)
There is an old story about a man who owned a goose that laid golden eggs. Greedy for immediate riches, he killed the goose and discovered there was nothing magical inside it.
Whitmire’s version may be even worse.
He wants to give away the goose for a few of the golden eggs it has already laid.
The attraction isn’t difficult to understand. Houston has a budget problem today. The administration says the immediate money could help cover a roughly $25 million current budget shortfall. (Houston Chronicle)
Politically, $50 million today is useful. A mayor and City Council can spend it today, balance a budget today, and tell voters what they accomplished today.
The millions Houston will no longer receive in 2035, 2045 or 2055 will be somebody else’s problem.
That is one of government’s oldest temptations: trade tomorrow’s income for today’s spending money.
Maybe City Council will surprise me Wednesday. I doubt it. I expect the agreement to pass.
But before council members vote, somebody ought to ask one very simple question:
If this is such a wonderful financial deal for Houston, why is The Woodlands so eager to take the other side of it?
Sources: The Woodlands Township’s description of the proposed agreement and payment structure; Houston Chronicle reporting on the Whitmire-Hollins dispute; Houston Public Media reporting on the controller’s estimate. (The Woodlands Township)
And yes—if they tag it again or vote it down, I reserve the right to remind you that Santiago was the cautious one.