Mayor, City Council Sued Over Diversion of Drainage Fees
Mayor Sylvester Turner and the entire Houston City Council have been sued for allegedly diverting approximately $44 million in drainage fees. This comes after the City campaigned last year to build a “lockbox” around those funds.
Both Turner and City Council Member Dave Martin told an audience at last year’s October town hall meeting in Kingwood, “If you WANT a lockbox around the drainage fee, vote FOR Proposition A. If you DON’T want a lockbox around the drainage fee, vote AGAINST it.” Prop A then passed overwhelmingly with 74% voting FOR.
Troubled History of Drainage Fee
This was actually the second time citizens voted on a drainage fee. In 2010, voters approved the drainage fee by only 51%. Unhappy voters challenged it in court based on the wording that appeared on the ballot. The summary did not disclose that the fee came from a new tax. The Supreme Court agreed and ordered a revote. That occurred in 2018.
Between 2010 and 2018, however, the City became addicted to the new source of money. Bill King exposed how the City had diverted nearly a quarter of a billion dollars from it to pay for things unrelated to drainage. So to keep the gravy train rolling, the City did two things.
- They said they were creating a lockbox around the money so it could only be used for drainage.
- Simultaneously, they changed the wording of the amendment to make the drainage fund easier to loot.
After that Town Hall, I emailed both Turner and Martin. I simply asked how the wording of the 2018 version of the charter amendment created a lockbox. Neither would answer directly. Martin and the Mayor’s spokesperson simply repeated, “If you want a lockbox, vote for Proposition A.”
How One Word Can Make a World of Difference
So I investigated the language. The wording of the 2018 version and the 2010 version differed – by only one word. See the post I wrote on October 20th of 2018. In the funding formula, the word “equal” changed to “equivalent” in one place. That meant the word equivalent now appeared TWO times in the formula. And that sent up a red flag for me.
Equal and equivalent sound alike. Most people think they mean the same thing. But the dictionary definitions differ. Equal means you could superimpose one number over the top of a second and not see a difference. Equivalent implies some sort of adjustment factor.
Equivalent gives wiggle room. Equal does not.
For instance, a Canadian dollar is not equal to a US dollar. A Canadian dollar equals 0.76 American. To convert one currency into the other and make them equivalent, you apply the conversion factor.
But what are the conversion factors built into the drainage fee? Those have never been publicly explained. In fact, Turner and Martin adamantly avoided discussing them.
Conversion Factors Help Divert $44 Million
In my opinion, the City deceived voters. There was NOTHING in the language of the charter amendment that created a stronger lockbox. The wording change created a weaker one, as I warned a year ago.
It’s not clear whether any change in the language of the amendment was even legal. The Trial Court’s Final Summary Judgment ordered a new election for Proposition 1 (what it was called in 2010), not a new election on a variation of it.
The net effect: we have less money for drainage, not more. The City diverted $44 million from Drainage to the General Fund. That’s not what voters expected or wanted.
Ignoring Will of the People
Plaintiffs in the lawsuit allege that defendants violated the terms of the City Charter and acted against the will of voters who approved Prop A with 74% casting Yes votes. For the full text of the suit, click here.
Officials led voters to believe they were approving a lockbox around the drainage fee when they were actually approving the opposite.
A Deep Dive into Diversion
Below is a deep dive into how voters (and the Plaintiffs) thought Prop A would work and how the City manipulated numbers to divert money.
At issue is the portion of the drainage fee calculated by the following words:
An amount equivalent to proceeds from $0.118 of the City’s ad valorem tax levy minus an amount equivalent to debt service for drainage and streets for any outstanding bonds or notes issued prior to December 31, 2011, and bonds or notes issued to refund them.
Houston City Charter, Article IX, 22(b)(iii)
Notice the use of the word equivalent TWICE. That gives the City wiggle room to manipulate the figures to the detriment of the drainage fund and the benefit of the general fund.
Plaintiffs in the lawsuit claim that the amount added to the Dedicated Drainage and Street Renewal Fund should have been $252,520,000 minus $161,226,060 or $91,293,940. Yet, according to the City’s 2020 budget, only $47,000,103 will be added to the Fund.
In other words, the City is only paying 51.6 percent of the amount into the fund that a strict “lockbox” interpretation of the City Charter would mandate. More than $44 million that should have gone into the drainage fund will go to the general fund.
“Undisclosed Manipulations”
$44 million is being diverted somewhere else through, in the words of the lawsuit, “undisclosed manipulations.”
The plaintiffs argue that defendants have no discretion to calculate the “amount equivalent to proceeds from $0.118 of the City’s ad valorem tax levy beyond its straightforward mathematical formula.” In other words, they’re arguing for an amount “equal” not “equivalent” to. That’s not the way the amendment is worded. But that is certainly the way the amendment was sold to voters.
Mayor’s Response, According to Fox
The city disagrees with the premise and the demand of the lawsuit, which would cripple city services. The charter calls for “an amount equivalent to” the $0.118. Once the city had to lower its tax rate because of the revenue cap, the amount transferred is the equivalent amount under the lower tax rate.
Transferring the 11.8 cent full amount would mean a reduction to the General Fund budget of $50M in this fiscal year alone. That would mean cuts to essential services like police, fire, solid waste, and other services. [Emphasis Added] Mayor Turner doesn’t support that. The 11.8 cents was the amount of the tax rate at the time that covered the existing debt payment that was attributed to previous street and drainage projects. Of a total tax rate of $0.63875 per $100 valuation, the 11.8 cents was equal to 18.5% of the total property tax rate.The equivalent of 11.8 cents has now exceeded the scheduled annual debt payment for existing debt when Proposition 1 was passed. Using the current tax rate, the percent allocated to DDSRF would increase from 18.5% to over 20%, and with the additional tax rate reduction just adopted, it would be nearly 21%. The city will vigorously defend its position.
By the Mayor’s own admission, the City knew all along that it needed to divert money from the drainage fee into the general fund to pay for other services.
I certainly don’t recall that discussion when the City came to Kingwood selling Prop A. They focused only on “the lockbox.” No official discussed adjustment factors or how they might be calculated. Voters just wanted their drainage issues fixed. And they have not been.
Counterfeiting the Currency of Communication
For me, this was the last straw. This is not a lockbox. It’s not even close. In fact, it’s the opposite of a lockbox. It’s a slush fund for $100,000 a year interns and God knows what else. The City isn’t exactly transparent with its accounting.
When elected officials counterfeit the currency of communication, how can the body politic make informed decisions? In this case, the City duped voters into approving the opposite of what they wanted – a lockbox around that money.
They used deception to stifle dissent.
And dissent or disagreement, no matter how difficult, is necessary for the health of the body politic and trust in government. That’s how we build compromises that work for everyone.
How to Make This Right
Voters have one more chance to make this right before it goes back to the Supreme Court again. Early voting started Monday morning. Every registered voter in Kingwood must vote in this mayoral election.
In the last election, Sylvester Turner won by about 4,000 votes City wide. 28,000 registered voters in Kingwood did not bother to vote in that election. We could have swung that election, but didn’t. Now here we are, beset by flooding problems from the streets of Elm Grove to the banks of the San Jacinto.
We must put people in City Hall that we can trust. Please get your neighbors, friends and family to the polls.
Posted by Bob Rehak on 10/24/2019
786 Days since Hurricane Harvey and 34 since Imelda
All thoughts expressed in this post represent my opinions on matters of public policy. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.
