DALLAS -- Houston Mayor Robert Lanier has proposed a $1.45 billion budget for fiscal 1993 that is balanced by one-time revenues and debt, including a $25 million bond package to come before voters Aug. 8.
The plan, which is for the year that began July 1, would raise the city's property tax for operations to its legal limit, though the overall levy would be unchanged.
With passage of a budget already almost a month overdue, the spending plan was reviewed by the city council at its meetings this week. No action is expected until at least after Aug. 12 public hearing.
By then, the council will know whether Houston voters approved the plan to use $25 million in five-year general obligation bonds to pay legal judgments against the city.
The referendum has been endorsed by the Mexican American Democrats and the Greater Houston Partnership, an influential business group, but has been opposed by the local chapter of the League of Women Voters.
In its opposition, the league noted that the referendum allows the judgment bonds to be sold in maturities of up to 40 years. However, the city council yesterday approved a resolution promising taxpayers that the debt would not exceed five-year terms, as Mayor Lanier had already planned.
"I don't know if it will defuse the League of Women Voters," said Robert Frelow, a spokesman for the mayor. "We were surprised by their position to begin with."
Within the hall, the plan for a debt-balanced budget is said to have council support. Only Houston Controller George Greanias has criticized the plan as a departure from a long-standing conservative budget practices.
Vacationing on the East Coast, Mr. Greanias on Tuesday issued a 12-word statement against the budget, saying, "It's a budget Congress would love. It increases services and increases debt."
Under the Lanier plan, an estimated $70 million deficit will be eliminated by a major restructuring completed in June of $450 million of Houston's GO debt. That restructuring extended the life of the city's bonds and freed up an estimated $39 million in tax revenues to pay for operations this year.
It also triggered a downgrade of the city's GO rating by Standard & Poor's Corp. The agency dropped the rating one notch to AA-minus, the third such downgrade since the city lost its AAA rating in 1985.
At the same time, Fitch Investors Service and Moody's Investors Service last month affirmed their double-A ratings. Analysts continue to monitor the city's budget.
Also, the budget relies in part on a pledge by the Metropolitan Transit Authority to transfer $36 million for each of the next two years to help pay for increased police and firefighters. It is not certain if that funding would be continued beyond fiscal 1994.
Finally, the mayor's plan hinges on voters approving the use of $25 million in bonds to settle legal claims historically paid as an operating expense.
Mr. Lanier is reportedly raising $100,000 for a committee supporting the Aug. 8 referendum. Already, the fund-raising has included contributions from bond lawyers and brokerages expected to profit from the city's debt offerings.
On Tuesday, the mayor told council members that if voters reject the debt plan, the city would have to eliminate 1,250 jobs in order to balance the budget.
Not everyone believes that. "We consider that gloom and doom," said Maryann Young, a spokesman for Mr. Greanias.
Ironically, Mr. Greanias forced the mayor earlier this year to seek a referendum on the GO bond plan, arguing that the city charter required majority approval of the issue.
While the mayor insisted that state law allowed GO debt to pay legal claims without voter approval, he agreed to call an election to avoid a lengthy court fight.
The controller recently warned against such budget gimmicks.
"I have opposed using borrowed money to meet the day-to-day expenses of city government," he wrote in a recent opinion piece. "It is the very practice that drove New York to bankruptcy in the '70s."
The Lanier plan would raise property taxes for operations to the legal limit of 50 cents per $100 of assessed valuation that voters set in the city charter in 1982. Without growth in the tax base or a successful referendum to raise the decade-old tax cap, Houston will have limited flexibility in the future.
The overall tax rate will not increase under the budget plan, however. Instead, the debt-restructuring accomplished in June shifts part of the levy from paying for debt service to paying for operations.
Even so, the 1993 budget plan may not affect the ability of the city to sell $100 million a year of long-term GO debt. Voters last November approved a $500 million capital bond plan expected to be sold in June in each of the next five years.
"Essentially, this budget, although it's balanced, has the effect of having exhausted most of our flexibility," said Al Haines, the city's chief administrative and budget officer. Asked about the future of the city's debt program, he said, "That's the one area of flexibility that we have. We could reduce that if we had to."