It is budget season, and the City Council is about to vote on Houston’s spending plan in June. The document will affect every resident, especially their daily necessities and the government services they use daily.
In early May, Mayor John Whitmire proposed a $7.5 billion budget for the upcoming fiscal year. The plan represents a 5.4% increase in spending from the current year.
This year, as with the Whitmire administration’s previous two budget cycles, Houston will not see a property tax increase. While Whitmire calls it a “transformative financial plan,” City Controller Chris Hollins calls it a “gimmick.”
The right solution, as council member and Budget and Fiscal Affairs Committee Chair Sallie Alcorn said, lies somewhere between the two financial models. The committee hears both sides and concludes the City Council votes.
The mayor’s case
Whitmire argues that Houston operates under self-imposed constraints that no other city accepts. For more than a decade, Houston has operated under dual revenue caps that forced a nearly 20% reduction in the tax rate while demand for service kept growing, per the Whitmire administration.
“This budget corrects that,” Whitmire wrote in his budget statement.
Houston has not charged a solid waste fee so far. It has not collected a standard right-of-way rental fee from its utility system, while other major Texas cities do both, often at higher rates.
Per his administration’s proposal, solid waste services are being moved into the Houston Public Works Combined Utility System, and a $5 utility fee will be charged to households, generating an estimated $116 million in General Fund relief.
Second, a new right-of-way rental fee, or 5% of utility gross revenues, will transfer an additional $104 million annually from the water and sewer system to the General Fund. Together, these two methods are projected to deliver $220 million in combined relief, reducing the expected budget gap from $209 million to $25 million.
Per Whitmire, these are standard practices that Houston has simply adopted, citing an Ernst & Young study, as part of his effort to eliminate “waste, fraud, and abuse” before raising property taxes. It recommended the city freeze hiring, offer voluntary retirement programs, restructure departments, and consolidate services.
This budget also funds five police cadets and 11 fire cadet classes, while providing raises of 8% for police, 3% for fire, and 3.5% for municipal employees.
The General Fund accounts for $3.16 billion (a decrease of $11.1 million from last year) and closes at $273.8 million, representing 10.5% of expenditures and comfortably above the city’s 7.5% policy floor.
The Controller’s case
Meanwhile, Hollins is not persuaded. He took his grievances with the budget to Houstonians, conducting a “reality check” tour from Acres Homes to Midtown, saying the budget in its current form is misleading and raids the city’s water infrastructure reserves.
His concern centers on the Combined Utility System (CUS), Houston’s water and sewer fund that holds $1.5 billion. The minimum reserve required under city policy and existing bond covenants is $1.36 billion, leaving $140 million available.
Drawing more than $200 million from that fund simultaneously through the trash transition and the right-of-way fee would obliterate that buffer entirely, Hollins argues. Meanwhile, the city faces a federally mandated consent decree requiring roughly $9 billion in wastewater system upgrades over the next decade, infrastructure obligations that depend on those reserves remaining intact.
Hollins also pointed out that the right-of-way transfer would cost the city millions to obtain the permit to carry it out.
“We are going to pay tens of millions of dollars, if not more than $100 million, for the privilege of robbing ourselves,” he told a town hall audience.
Hollins calls the $5 “administrative fee” a garbage fee, arguing that a city-commissioned Burns & McDonald study found that the true cost of solid waste service is approximately $32 per household today and is projected to reach $46 by 2031.
He says the fee is regressive. The roughly 400,000 households receiving city trash service, predominantly working-class and middle-class homeowners, would pay the fee. Meanwhile, commercial properties, corporations, and wealthier HOA communities using private haulers would not.
A budget in the middle: Council’s view
Alcorn occupies a position in between, as chair of the Budget and Fiscal Affairs Committee.
In a conversation with the Defender, she said she is not dismissing Hollins’ concerns, but she is not ready to side with the administration either.
“It’s the administration’s budget,” she said. “We work with the administration, since they created the budget, to better understand the budget. The controller weighs in, too, but our review is independent. We call in each department…and discern the information that’s presented in the budget.”
Alcorn noted that Randy Macchi, Houston Public Works Director, expressed confidence in the CUS drawdown and assured the council it would not affect infrastructure projects or require a water rate increase, directly countering Hollins’ warnings.
On the $5 admin fee, Alcorn acknowledged the regressive nature of flat fees but defended the starting point as manageable, noting a fee increase would require a council vote.
She framed it as a bridge to a more sustainable outcome that would generate revenues to cover pensions, retiree health benefits, and union contracts with the police and fire departments, as well as municipal workers.
“He [Whitmire] started at $5 because he didn’t want the sticker shock. He didn’t want to unfairly burden households going from $0 to $25…This, to me, is buying time. I have been one who has supported an increase in property taxes. We are going to need additional revenues to cover the costs of our services as well as honor the contracts that we have.”
Sallie Alcorn, City Council Member
“That’s just the start,” she said. “He [Whitmire] started at $5 because he didn’t want the sticker shock. He didn’t want to unfairly burden households going from $0 to $25…This, to me, is buying time. I have been one who has supported an increase in property taxes. We are going to need additional revenues to cover the costs of our services as well as honor the contracts that we have.”
A crucial aspect of the budget is the city’s pension liability, which stands at $1.7 billion. Credit rating agencies have already flagged pension liabilities and the revenue cap as structural risks, per Hollins.
A public hearing on the FY2027 budget is scheduled for June 3 at City Hall. The budget must be adopted before July 1, when the new fiscal year begins.
