1. City of Houston: Challenges and Opportunities, 2016 and Beyond Chris B. Brown, City Controller Garden Oaks Civic Club, April 5, 2016

2. City of Houston’s General Fund and Expenses FY 2016: $2.3 Billion in Available Revenue Taxes = 71% of Funds – $1.11 Billion property taxes, $629 Million sales taxes, Other Sources (Franchise Fees, Permits, Service Charges), $391 Million Revenues from Enterprises, FY 2016 Airport, convention, utilities: $1.67 Billion Revenues from Special Revenue Sources: $400 Million Total Available Revenue: $4.5 Billion

3. Expenses Personnel = 63% of Budget Expenditures (salaries, benefits, pensions) Public Safety Departments Police, Fire, Municipal Courts Development and Maintenance Planning, Public Works, Engineering, Solid Waste Human and Cultural Services Health and Human Services, Housing and Community Development, Library, Parks Administrative Services Mayor, City Secretary, Controller, Legal, HR, IT, Legal, City Council

4. The City’s Major Challenges, 2016 and Beyond City’s three pension programs—police, fire, municipal—and other post-employment benefits. Annual Required Contribution needs to be met. New Government Accounting Standards Board reporting mandate greatly increases net pension liability on paper.

5. The New GASB Standard 68 Pre 68 (FY 2014) Post 68 (FY 2015) (Net pension obligation) (Net pension liability)* Municipal $477 M $2.31 B Police$668.7 M $2.69 B Fire$51.2 M $577.7 M Total: $1.196 B $5.34 B *How is Pension Liability calculated? This figure is actuarially calculated based on life expectancy tables, and it reflects the expected total pay-out of pensions over the remaining lifetimes of all the employees in the pension plan and the employees’ spouses who would continue receiving the pension payments following the employees’ deaths.

6. Aging infrastructure, including COH assets. Mayor’s emphasis on 24-hour pot-hole repair; many streets need repaving. Increased “safety-net” services for citizens in need. Rising interest rates may slow down ability to re- finance. (During previous six years, $500 million saved through re-financing.) Revenue stream (property and sales taxes) will not keep up with population growth. Revenue cap limits budget growth. Sales tax trending down; property tax $16 million less this year.

7. To do business in Texas, you have to tolerate uncertainty and manage your way through unexpected short-term oil-market disruptions, but there is a long-term payoff for those that do so successfully. -- Univ. of Houston Bauer College of Business

8. Downtown Master Plan Activating the streets with local residents, downtown workers, conventioneers and visitors attracted by shops, restaurants and entertainment venues will create a vibrant, safe convention district that appeals to meeting planners and exhibitors. Convention Facilities – no immediate need for expansion. Hotel accommodations: need 2,000 rooms; new Marriott scheduled to open mid-2016. Attractions and activities: Minute Maid Field, Toyota Center, BBVA Compass Stadium, restaurants, clubs. Transportation: Metro’s Main St. line and expansion; free downtown circulating bus.

9. Houston Continues to be a Center of International Business Third in U.S. corporate headquarters for Fortune 500 companies. Cost of living below U.S. national average. Low business taxes — no state, personal or corporate income tax. Highly talented and cost-effective labor. Superior transportation network — Lower transportation costs. Proximity to market, supply chain. Variety of higher education institutions.

10. Houston Airport System Serving over 50 million passengers annually, including 9 million international travelers. Port of Houston 25-mile long complex of 150 public and private facilities, #1 U.S. port in foreign waterborne tonnage.

11. Convention and Entertainment Destination Hundreds of events annually for residents and visitors of all ages Museum District Theater District 350 City Parks Sundance Cinema Buffalo Bayou Master Plan Offshore Technology Conference Houston Livestock Show and rodeo Final Four, 2016 Super Bowl, 2017

13. Questions? For more information about the Controller’s Office, visit www.houstontx.gov/controller Audit 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 www.houstontx.gov/controller