What happened
The ruling is expected to increase the city’s budget gap for next year, City Controller Chris Hollins said in a Feb. 1 statement.
“The city may be liable for over $100 million this fiscal year, and what was already a $230 million budget gap for next year is now $340 million,” Hollins said in the statement. “As such, the city government will be under pressure to consider painful cuts to essential services or find new sources of revenue.”
Hollins told City Council on Feb. 5 that he's concerned he won’t be able to certify the fiscal year 2026 budget and that actions must be taken immediately. Hollins called for the creation of a “joint emergency task force” to address the situation.
“I’m concerned about our ability to provide critical services in the face of our financial reality,” Hollins said.
Finance Director Melissa Dubowski said the city is looking into receiving $50 million from the Metropolitan Transit Authority of Harris County to help offset the costs.
The backstory
The 2019 lawsuit centers around a city charter amendment that required Houston to allocate 11.8 cents per $100 collected in property taxes toward street and drainage projects. However, engineers and Houston residents Bob Jones and Allen Watson sued previous Mayor Sylvester Turner's administration in 2019, alleging that the city has not been allocating the funds and that the city underfunded infrastructure funds by almost $50 million.
The 14th Court of Appeals sided with Jones and Allen in April, but Houston appealed to the Texas Supreme Court in July. That appeal was ultimately denied Jan. 31.
What they’re saying
Mayor John Whitmire said in a Jan. 31 statement that he doesn’t disagree with the ruling and intends to comply with the court’s decision.
“I was aware of the pending lawsuit from 2019 that I would inherit, and I knew it would impact our budget,” Whitmire said in the statement. “This will allow us to collaborate with other levels of government and require a continued examination of all city operations to find savings, which is part of my commitment to eliminate waste, duplication and corruption.”
Council member Sallie Alcorn said the city has a “very healthy fund balance” that can help the city bridge the budget gap, which she said is something the city has done before.
“There’s not a Houstonian in sight that doesn’t think we need to spend $100 million or probably more on streets and drainage, so I think this will be money well spent," Alcsorn said. "And it’s just a matter of making sure we can make the rest of the budget work."
Stay tuned
City Attorney Arturo Michel said during the Feb. 5 meeting that the city has until June 30 to move the $100 million to the streets and drainage funds, but there is an opportunity for a rehearing and clarification of the ruling.
The $100 million is going toward the Dedicated Drainage and Street Renewal Fund, city officials said. As of Feb. 5, there has been no discussion on what projects will receive the extra funding.
