“Power tends to corrupt. Absolute power corrupts absolutely.”
Lord Acton, British historian.

Houston’s city government has always been conducive to an Enron-like environment due to the benevolent (you hope) dictatorship strong-mayor form of government where nothing even gets on the city council agenda unless the mayor wants it there and dissident council members can be punished by their pet projects or ideas not getting to see the light of day on the council’s agenda. The situation is compounded by the fact that campaign contributions come largely from those who do business with the City or who are power brokers.

But this Enron-like environment has been taken to an art form level under the Bill White administration. They say the tone is set at the top. Well, Bill White pays property taxes on only 56% of the fair market value of his home, according to the appraisal district web site. He openly defies the will of the people and sets his own rules of the game. And the city council, with few exceptions, docilely sits there and does nothing, a la Enron-style.

A prime example is paragraph (c) of his proposed Prop G to amend the City charter, which states “City Council may prescribe methods for complying with limits on revenues in this Charter to account for changes in accounting standards or practices.”

In other words, city council (vis-ŕ-vis the mayor), rather than the City’s independent accounting firm, will commence interpreting the accounting rules relative to whether the City has complied with any revenue cap, such as the 2004 voter-approved Prop 2 Taxpayer Bill Of Rights (TABOR). As of right now, the Prop 2 TABOR requires that the City’s independent accounting firm annually certify as to the City’s compliance with the TABOR cap. The mayor’s Prop G would enable city council (the mayor) to totally game revenue cap requirements.

City council members (who don’t even have to prove they can balance their own checkbooks) have about as much business interpreting accounting rules and standards as you have in prescribing their medicines.

Prop G’s giving the mayor, through his lapdog city council, this accounting authority is analogous to what the Enron board of directors did in giving Ken Lay and Jeff Skilling the latitude to implement their nefarious accounting schemes, regardless of what the Financial Accounting Standards Board and the Securities Exchange Commission rules were.

This proposed Prop G right for the mayor and city council to game the system Enron-style would come upon the heels of many examples showing their inclination to do just that. Consider the following.

1. See the “Mayor’s Secret Memo” button on this page. You will note that the City’s director of finance and administration (who had just served as the City’s interim city controller, the supposedly independent watchdog office for the voters) suggests that the City circumvent the intent of the forthcoming voter-approved Prop 2 TABOR by bypassing depositing property taxes in the general fund and instead deposit the collections directly into the debt service fund, thus supposedly circumventing the revenue cap. This “RUSH” memo to the mayor at 7:38 PM on October 26, 2004 shows that the mayor et al were working feverishly until the last moment before the November 2, 2004 election on how to thwart the will of the people. You will note from the mayor’s writing on the memo that he is attempting to get the Houston Chronicle to aid in this scheme by having Frank Michel, his City-paid public spokesman and former chairman of the Chronicle’s editorial board, contact the Chronicle.
2. Little did we know that, after the Prop 2 TABOR passed, the mayor would then spend in Enron-style a minimum of $100,000 of taxpayers’ monies in three losing court battles to prevent the people’s Prop 2 TABOR from being implemented into law, all with the city council’s willing complicity.
3. It is very troubling that city council went along with the mayor in spending taxpayers’ monies in these losing efforts to thwart implementing the Prop 2 TABOR, even after the mayor’s attorneys brazenly admitted (Enron-style) in court on July 29, 2005 that the “key objective” of city council in placing the mayor’s Prop 1 on the November 2004 ballot was “to prevent Proposition 2 from becoming the law”.
4. Further troubling is that city council has sat on their hands (Enron board style) and permitted the mayor to ignore the provisions of his own hoax Prop 1 passed in 2004. In fiscal 2006, the very first year under the Prop 1 cap on total property tax revenues, the City exceeded that cap by $8 million and city council, with few exceptions, has rolled over (a la Enron) and permitted the mayor to violate his own Prop 1, by not rebating the $8 million to taxpayers.
5. In another Enron–type accounting gimmickry, in his Prop 1 the mayor included a provision for including a population increase factor in water and sewer rates, when increases in population automatically increase water and sewer revenues. Any middle school student with reasonably decent math ability could explain that math doubling effect. Yet the mayor failed to disclose this “double-dipping” to the voters and city council again rolled over (a la Enron).
6. Regarding the mayor’s Prop 1 (Enron-type) hoax, he also did not disclose to the voters that Prop 1 exempted from its water and sewer rate increase cap any water and sewer rate increases that were deemed by city council to be for debt service. This is an exceedingly important point in that debt service takes about 50 cents of every water and sewer revenue dollar.
7. Mayor White has declared that, just by his fiat, passage of his Prop 1 in 2004 automatically eliminated from the City charter a 1980s charter amendment passed by the voters which had set a $0.50 per $100 valuation cap on the portion of the City’s property tax rate attributable to maintenance and operations (M&O). This even though apparently not one word was mentioned to city council, and certainly not to the voters, that this was his intent. This Enron-like maneuver, if allowed to stand, will permit the mayor to commit an increasingly larger portion of the City’s overall property tax rate to cover the City’s operating expenses (M&O), cover this maneuver by rolling (refinancing) City debt, and leave one of his successors to deal with the deferred debt problem. And, again, city council is rolling over, a la Enron.
8. For some real creative Enron-style accounting, one should review the City’s history of moving monies around between its general fund, enterprise funds and special revenue funds. This can be done in a number of ways. Fundamentally, the usual objective is to lessen the stress on property taxes and other revenues of the general fund, which is often the only budget area receiving city council and media attention.
• Excess revenues of the water and sewer fund can be moved to the general fund, as in the past practice of declaring such excess revenues as being available for “any lawful purpose”. The mayor’s proposed Prop G would supposedly end that practice. However, there are other ways to skin the cat.
• The general fund can increase its charges to the enterprise funds, and even to the capital improvement funds, for administrative and other services.
• General fund employees have often been moved to the water and sewer fund and the airport fund and their salaries and benefits borne by those funds.
• Remember former mayor Lanier’s increasing HPD’s police force? Well, part of that was accomplished by merely transferring the airport police from under the airport management to the control of HPD, and at the same time gaining general fund revenue from the airport fund for the estimated salaries, etc. of the airport cops. Both purposes accomplished, without the City having to hire anyone, more HPD cops as promised, and a new source of revenue being found for the general fund, the budget focus area.
• Remember the proposed “rain tax” a few years ago? Well, the City got around that problem by just transferring drainage costs from the general fund to the water and sewer fund, and in the process took away your right to vote on drainage bonds.
• The City has moved several legal and finance and administration personnel from the general fund to special revenue funds, thereby getting them out of the general fund budget.

  All of this should make it evident that voters should VOTE NO on Prop G and keep the enterprise funds under the Prop 2 TABOR cap.

9. Remember how Enron borrowed money and managed to record it as revenues? Well, the City has used the proceeds of pension plan bonds to balance the general fund’s operating budget and thereby supposedly keep from violating the Prop 2 TABOR revenue cap. It is true that the City did not call the proceeds revenues, just “Other Sources”! Presumably, after they wake up, the trustees of the pension plans and the plans’ attorneys will take appropriate legal action regarding the City taking the pension plan bond proceeds for the City’s use rather than depositing the proceeds in the pension plans’ bank accounts.
10. The City has also used the pension plans for other financial finagling. The City has greatly back loaded principal payments on the pension plan bonds, which will cause taxpayers to have to pay hundreds of thousands of dollars in extra interest costs over the life of the bonds. Additionally, the City is greatly under funding the liabilities of two of the three City employee pension plans. This results in greatly under stating the actual current pension expense and defers the time of reckoning for pension costs.
11. Without conferring with the author of the Prop 2 TABOR, the city attorney has opined that the City’s water sales to municipal utility districts (MUDs) are not included under the TABOR cap. The City has struck several deals with MUDs whereby the City obtains the MUDs’ sales taxes in return for cheap water.
12. At least Enron apparently made its audited annual financial statements available to the public by the legally required date. That is more than can be said for the City for several years. The City is required by state law to make its audited annual financial statements available to the public within four months (October 31) after its June 30 fiscal year end. However, for example, the City did not make publicly available its audited annual financial statement for its 2005 fiscal year until after the February 6, 2006 date that its independent accounting firm signed off on the report---which sign off itself was over 3 months past the October 31 due date for public release. The Prop 2 TABOR added the City charter requirement that by the same October 31 due date the City’s independent accounting firm must furnish a public certification that the City has complied with the TABOR cap, or by how much the cap was violated. Based upon past procrastination, it is safe to bet that voters will not have access by the coming November 7 election to either the audited financial statement for fiscal 2006 or the auditors’ compliance certificate for that fiscal year. Thus Houstonians will have been denied valuable information required by law before they vote. Even Enron did not pull that kind of stunt!
13. Even when the City does something legal, they try to bury it in the audited annual financial statements. In fiscal year 2003, the City increased its previously reported beginning net assets of $4.2 billion by the incredible amount of $1.2 billion (29%!)---for the purported original cost of all land underneath the City’s roads and streets acquired since the incorporation of the City 169 years ago! But for what conceivable beneficial purpose? Just because the official body overseeing governmental accounting says the City should do so. One would think that when the City’s net assets are increased by 29% that huge event would require prominent disclosure in the City’s audited annual financial statements. But the City did not even mention it in its “Management’s Discussion and Analysis” section of the annual report. The $1.2 billion adjustment shows up very much buried in an innocuous manner in a sub-footnote on page 53 of the report. Even there it is impossible to tell what the $1.2 billion adjustment was. One has to inquire of the city controller’s office to find out the nature of the item. Upon pursuing the subject with the mayor’s office and numerous city council members, it became obvious that none of them had ever even seen the City’s audited annual financial statements for ANY year, let alone read and understand them! And Mayor Bill White wants to, through his Proposition G, take away from the City’s independent accounting firm the responsibility for interpreting the City’s accounting standards and rules, as they relate to City charter revenue caps, and give that responsibility to city council?! GET REAL! Move over, Enron!