Small Business Today Magazine FEB 2015 TAYLOR CONSTRUCTION MANAGMENT | Page 16

EDITORIALFEATURE

A Fiscal Plan

for the Future
By Annise D. Parker, Mayor of the City of Houston

A

s economic booms and bubbles
underscore the importance of
healthy financial reserves and longterm planning, city leaders are also
hearing increased calls for financial transparency from constituents interested
in how their taxes are being managed.
The City of Houston is addressing these
concerns with new financial policies that
were approved in early December by
the Houston City Council. These policies
that will guide budget development beginning with the 2016 fiscal year (officially starting July 1, 2015), represent a guide
for improved financial management and
heightened accountability with more focus on making sure today’s decisions are
sustainable in the future.
The City of Houston staff did an outstanding job of researching and developing these policies using lessons learned
in other communities to craft a document that suits Houston as we work
to strengthen our City’s financial future.
The policies were drafted over the past
year by City finance staff in coordination
with the office of City Council Member,
Stephen Costello, who chairs the City
Council’s Budget and Fiscal Affairs Committee. Developed with input from numerous City departments and the City’s
financial advisors at FirstSouthwest, the
policies address debt management, internal financial controls, and evaluation
of economic development investment.
In addition, they reflect the best practices of the Government Finance Officers
Association and other cities across the
country.

These new policies include:

• An increase in the City’s minimum financial reserves from 5 percent to
7.5 percent of annual General Fund
expenditures (less debt). To hedge
against risk, the policies also provide
for a slight increase to the City’s
Budget Stabilization Fund (formerly
known as the Rainy Day Fund).
• A new focus on recognizing the full cost
of capital items and projects including a
progressive increase in funding allocated for operating maintenance up to 2
percent of assets’ current replacement
value as well as a stipulation that all projects in the City’s Capital Improvement
Plan include an accompanying five-year
operating budget impact projection.
• Greater emphasis on long-term planning and forecasting to identify and
anticipate upcoming budgetary challenges. This includes requirements for
regular projections of long-term pension liabilities and the annual presentation of a five-year financial forecast
that identifies the potential budget
imbalances in future years and the
plans for achieving budget balance.
• A conservative approach to debt management including limitations on longterm increases in debt service payments, standards under which debt
refunding may be initiated, and a road
map for gradually reducing the City’s
maximum annual General Fund transfer for debt service to 10 percent of
General Fund revenues.

14 SMALL BUSINESS TODAY MAGAZINE [ FEBRUARY 2015 ]

The City Council’s adoption of the policies is just a first step. The rules will only
yield benefits if they are used as the framework for fiscal responsibility and prudent
stewardship of public resources. Adherence to the policies is essential to the
City’s long-term financial health especially
in light of the financial challenges ahead.
The new 13-page document also includes a number of items intended to improve transparency in the City’s management of public funds not just for the City
Council but for the citizens of Houston. A
highlight of this focus requires the City to
report in its annual budget whether it is in
compliance with each component of the
policies. Public reporting on our adherence to the new policies is critical. While
the policies codify our current practices in
many regards, they also set a high standard
for us not just in how we manage and utilize public resources but how we inform
citizens and their elected representatives
as to our progress.
The full text of the policies is available at
http://www.houstontx.gov/finance/COH_
financial_policies_approved_120314.pdf
Serving since January 2, 2010, Annise D. Parker has
been elected as the Mayor of Houston three times.
She is Houston’s 61st Mayor and one of only two
women to hold the City’s highest elected office. In
2010, Time Magazine named Mayor Parker one the
100 most influential people in the world. Mayor Annise Parker is a Steering Committee Member of the
C40 Cities Climate Leadership Group and serves on
President Barack Obama’s State, Local, and Tribal
Leaders Task Force on Climate Preparedness and Resilience. She is also on the advisory board of Small
Business Today Magazine. For more information, go to
www.houstontx.gov/mayor/.