CITY OF HOUSTON

Houston 2012: Back to NormalHouston Association of Realtors’ Texas Realtor Leadership Program

October 4, 2012

Ronald C. Green, Controller

City Controller• Houston is one of the few cities that elects a controller – our

Chief Financial Officer.• In recession, it has become a very visible office.

• The Controller is independent of City Council and the Mayor and, thus, serves as a “financial watchdog” over the City’s finances. That’s good for the City—and good for taxpayers!

Citizens

Mayor Controller Council

The Office of the Houston City Controller superintends the fiscal affairs of the City:

• Conducts audits; • manages investments and debt; • prepares accurate and timely financial statements; • provides leadership on policy issues pertaining to the City’s

financial health; • has the independent authority to conduct performance

reviews of the City bureaucracy;• assesses the City’s future financial condition with accurate

forecasts of projected revenues and expenses and area’s economic outlook.

Divisions of the Controller’s Office

Executive/Administrative

Treasury

AuditIT/ Operations

Financial Reporting

Recent Bond IssuesHistorically low municipal rates have meant big savings—

without lengthening the term of debt.

• August 17, 2010: $212 million Combined Utility bond sale = $30 million in savings.

• November 16, 2010: General Obligation Debt Refunding = $19 million in savings.

• June 28, 2011: >$500 M refinancing airport debt = $36 million savings.

• July 19, 2011: Refund debt for Convention & Facilities = $9.4 million savings.

Continued…

Bond refinancing, continued

• August 23, 2011: $167 million bond sale (Utility System) = $30.5 million in savings.

• April 5, 2012: $503 million Airport refinancing = $55.6 million savings.

• May 22, 2012: $307 million General Obligation Debt = $16.5 million savings.

Audits

• FY 2012: the Audit Division engaged in 25 Audits and Special Projects that produced 12 Audit Reports.

• FY 2012, the audits focused on compliance, performance, process

reviews, ongoing monitoring, and quality assurance, which resulted in $2.75 million dollars in direct cost-savings.

• Audit continues to develop a specific IT Audit Function by providing aggressive training and staff development that will more efficiently analyze data from disparate systems.

• The Audit Division has developed Performance Metrics to be implemented during the FY2013. These will provide a framework for continuous improvement that considers all stakeholder perspectives.

Financial Reporting Division

•Responsible for the preparation of both the Monthly Financial and Operations Report (MFOR) and the Comprehensive Annual Financial Report (CAFR)

•Annual Trends Report

•Forecasting

Operations and Technical Division

• Performs certification of funds for contracts, accounts payables, bank reconciliation, payroll payments, and record retention for all City-wide departments

• City's cash disbursements now available on-line:www.houstontx/gov/controller/evendordisbursement.html

Houston’s General Fund

FY 2013: $2.1 Billion in Available Funds

• Taxes = 71% of Funds : $900 Million property taxes (up 4% from 2012); $577 Million sales taxes (up 4.5% from 2012).

• Other Sources (Franchise Fees, Fines, Charges for Services, Beginning Fund Balance, Licenses and Permits, other) = 29% of Funds.

- Continued -

Revenues from other sources—Enterprises (FY 2013)

•Airport System, $437 Million; •Convention & Entertainment Facilities, $92 Million; •Houston Emergency Center, $26 Million; •Storm Water, $54 Million; •Building Inspection, $62 Million; •Parking Management, $19 Million; •Water and Sewer, $1.4 Billion•Dedicated Drainage and Street, $235 Million.

Total Available Resources: $4.5 Billion

FY 2013 General Fund ExpendituresPublic Safety Departments, $1.2 Billion

Police, Fire, Municipal Courts

Development and Maintenance, $162 MillionPlanning, Public Works and Engineering, Solid Waste

Human and Cultural Services, $153 MillionHealth and Human Services, Housing and Community Development, Library, Parks

Administrative Services, $99 MillionMayor, City Secretary, Controller, Legal, HR, IT, Legal, City Council

General Government, $126 MillionDebt Service, $241 Million

Total Expenditures: $1.9 Billion

5%12%

8%

7%

8%60%

General Fund Expenditures/Other Uses FY2013 Budget

Administrative Svcs.

Debt Svcs.

Dev. & Maint. Svcs.

General Government

Human & Cultural Svcs.

Public Safety

What we are doing to meet the City’s budget challenge

• Pension negotiations.• Consolidation of services (fleet, fuel, payroll, HR, IT).• Management initiatives (for ex.: Dept. budgets 4-27% less

than FY2011; four Health Centers now managed by Federally Qualified Health Centers).

• Employee furloughs and layoffs, FY 2011 (745).• Restructuring debt.• Self-insured health plan.• Increased collection efforts.• Increased 300 fees.

Importantly, Houston has turned the corner…..

Houston MacroeconomicsMedium- to Long-Term Economic Prospects

Signs of Houston’s Recovery• Medium – Long Term Prospects– Recession in 20 largest metro areas: Houston last

in, first out (after just 16 months of job losses)– GHP: 118% of lost jobs regained (June 2012);

Boston, 2nd with 75% regained.– Forecasters: employment growth 2-2.5% through

2012; population growth 2.7% annually next three years.

Benchmarks• Houston Purchasing Managers Index *(PMI): up

from 39.0 in March 2009 to 60.0 in mid-2012.

• Domestic rotary rigs: up from low of 876 in June 2009 to 1,994 in August 2012.

• 255,000 cars, trucks sold in 2011, up 6.1% over 2010.

• Air traffic continues to grow: domestic up 2%; freight up 3.7%.*PMI: a short-term indicator for regional production; a range from 0-100; reading above a neutral 50 indicates likely growth in production over next quarter; based on eight (8) components: sales, production, employment, purchases, prices paid, lead times, purchased inventory and finished goods inventory.

A Recovery in Real Estate in the MSANext decade, 44,000 new households per year

• Through 2020, Houston will need 25,000-28,000 single family units annually; 15,500-16,500 rentals.

• Residential: August 2012: homes selling at greatest pace since Aug. 2007; Aug. ‘12 up 20% over Aug. ‘11

• Aug. 2012, 15th consecutive positive month.• Average and median price SFH up 4% from 2011;

highest Aug. ever.• Houston: A seller’s market—but buyers benefitting

from low mortgage interest rates.

Commercial, Industrial, Retail

• Spring 2012:• Three consecutive quarters of positive absorption, in

CBD, Katy Freeway/Energy Corridor, West Loop/ Galleria, Woodlands; 2.8 million s.f., in 2011 –vs. negative 320,000 in 2010)

• 850,000 s.f. retail space under construction (Dec. 2011), 73 % pre-leased.

• Vacancy and rental rates are stable.

Gulf Coast—The Most Dynamic of the Three Coasts

• 2014 - Opening of the $5.25 Billion Panama Canal Expansion.

• Cargo ships 2x the size of current ships – as many as 25% from Far East will pass LA and Long Beach and come to Gulf ports.

• Port of Houston had 28% jump in foreign cargo last year – with expanded Panama Canal, much larger container ships & continued increase in foreign tonnage.

Hire Houston FirstPassed by Houston City Council August 31, 2011;

Preference for City contracts based solely on geography

PERSONAL PROPERTY (GOODS):• If contract value is $100,000 or greater, then contract is awarded

to City Business that is within 3% of lowest bid. • If contract value is $50,000 - $100,000, then contract is awarded

to City Business that is within 5% of lowest bid.

SERVICES: • If contract value is $100, 000 or greater, then contract is awarded

to Local Business (eight counties in surrounding area) that is within 3% of the lowest bid.

• If contract is $50,000 - $100,000, then contract is awarded to Local Business that is within 5% of the lowest bid.

Participating in Hire Houston Firstwww.houstontx.gov/obo/hirehoustonfirst.html

• Hire Houston First is part of the Office of Business Opportunity.

• Interested parties must complete the Hire Houston First Application and Affidavit*

(available at web site, above)• Phone: 832-292-0954; fax: 832-393-0952• Applications may be submitted via e-mail:

HHF-MOBO@houstontx.gov*Affidavit must be notarized, and this may be scheduled at City Hall annex

Houston -- No. One Rankings• Top U.S. City Among Global Metro Monitoring—GDP per capita

Brookings Institute, Jan. 2012• Best U.S. City, Industrial Manufacturing

Forbes.com, Dec. 2011• Top 10 Manufacturing Cities

Business Facilities - Jan. 2012• Fastest Growing Millionaire City in the U.S.

Forbes.com – July 14, 2011 • Fastest Growing Metro Area

Rice University's Kinder Institute for Urban Research–July 2011 • Green Building Initiatives (Large City Category - population over 100,000)

The U.S. Conference of Mayors – June 17, 2011 • Most Affordable City to Do Business - Worldwide

Cities of Opportunities 2011 (as reported by PwC and The Partnership for New York City) - May 3, 2011

• Top 10 Major Cities FDI StrategyFDI Magazine – April/May 2011

Top Local Government Green Power Purchaser Environmental Protection Agency - April 2011 Lowest Cost of Living - Large Metros

ACCRA Cost of Living Index – First Quarter 2011 Lowest Estimated Land and Regulation Costs New Geography - November 2010 Best Cities to Start a New Career The Daily Beast - October 2010 Largest 5 Year Employment Gain (June 2005 - June 2010)

U.S. Bureau of Labor Statistics Top Cities for Recent College Grads Bloomberg Businessweek – July 2010 Best Cities for Young Professionals Forbes.com – June 2010 Highest Level of Entrepreneurial Activity Among Largest Metro Areas Kauffman Foundation of Entrepreneurship Top Destination City U-Haul International – March 2012

Hot Topics

• Red Light Cameras – once and for all, off• Drainage Fee• Pension Negotiations• OPEB (Other Post-employment Benefits)• Redistricting—two new City Council seats• Continued budget challenges

Fraud Hotline

City Controller is committed to eliminating fraud and waste in City government.

Fraudulent activities being committed by government employees or officials, citizens, or business entities defrauding the City of Houston, can be reported at:– www.controller/audit/fraud.html

A Collaborative Effort by the City of Houston Controller’s Office, the National League of Cities, the Federal Reserve Bank, the FDIC,, area banking institutions and non-profit financial education agencies.

“You’ve worked hard for your money—protect it.”City Controller Ronald C. Green

www.bankonhouston.org

For more information about the Controller’s Office, visit

www.houstontx.gov/controllerAudit Reports, Monthly Financial Statements, Annual Financial Report, Press Releases, Investment Policy, Glossary of Financial

Terms, Photo Gallery, Links to Government, University and Financial Institutions.

If you would like a copy of this presentation, please e-mail controllers@houstontx.gov