Houston Metro’s ‘fragile position’ created by Bill White’s debt-heavy plan, as Democrat Sylvester Turner predicted in 2003

In 2003, liberal Bill White’s campaign for Houston mayor included promises about what he would do for Houston Metro if elected: "My financing plan makes Metro's solutions less burdensome on taxpayers and those using bus services, without compromising the level of service described in Metro's rail plan through 2025." [1]

However, Democrat State Representative Sylvester Turner of Houston warned that White’s plan would be a disaster for Metro: “(White) pays for some of the capital costs, but does not provide for a continuing revenue stream for the operational costs beyond 2009. The net effect is that his proposal would bankrupt the rail system before the rail expansion starts while creating additional debt for Metro at the same time." [1]

Turner was right, as the Houston Chronicle reports today that financial experts agree Metro is in a “fragile position” because of the debt-heavy financial plan White promoted and his hand-picked leadership executed. [2]

Barry Goodman, Metro's first executive director, said, “If Metro was a corporation, you'd be looking at junk bond status right now. They've leveraged themselves to the hilt.” [2]

“Liberal Bill White’s fiscal irresponsibility created a train wreck for the city of Houston,” said Texans for Rick Perry spokesman Mark Miner. “During Bill White’s first campaign for mayor, a fellow Democrat accurately predicted the problems Bill White’s debt-heavy plan would cause for Metro. After being elected, Bill White appointed a top campaign donor chairman of the Metro board yet today he continues to accept no responsibility for the agency’s problems.”

Earlier this year, the Houston Chronicle said White “accepted no responsibility for Metro's current problems — which include [CEO Frank] Wilson's apparent skirting of federal ‘Buy America’ rules on the purchase of two rail cars — and praised Metro for getting this far in the federal grant application process.” [3]

As a candidate for mayor in 2003, White accepted a $5,000 maximum individual campaign contribution from David Wolff, and then appointed Wolff Metro Chairman after his election. [4]

In his final days as mayor, Bill White told Mayor-elect Annise Parker not to change Metro’s leadership. [5]

Days later, Bill White accepted a $7,500 campaign contribution from Wolff – and a $7,500 contribution from Wolff’s wife. [6]

SOURCING

[1] “Mayoral candidate suggests alternative rail funding proposal,” Houston Chronicle, 6/4/03, full article below

[2] “Sunny outlook reverses at Metro,” Houston Chronicle, 8/30/10, full article below and online at http://www.chron.com/disp/story.mpl/metropolitan/7177284.html

[3] “Parker continues to bash Metro, but to what end?” Houston Chronicle, 5/11/10, http://www.chron.com/disp/story.mpl/metropolitan/falkenberg/6999053.html

[4] “Perry seeks to pin Houston transit problems on ex-Mayor White,” Austin American-Statesman, 5/24/10, http://www.statesman.com/news/texas-politics/perry-seeks-to-pin-houston-...

[5] “With a plethora of pressing issues, the new mayor should tread lightly on Metro,” Houston Chronicle, 12/20/09, http://www.chron.com/disp/story.mpl/editorial/6778840.html

[6] Bill White For Texas, COH report, Jan. 15, 2010, page 418

“Mayoral candidate suggests alternative rail funding proposal”
Houston Chronicle, June 4, 2003
By John Williams

Houston mayoral candidate Bill White suggested a rail alternative Tuesday that reduces by half what the Metropolitan Transit Authority is proposing.

White said the plan Metro unveiled in late April relies too heavily on money now used to repair area roads.

Metro's funding proposal for its $3.3 billion transit plan has drawn criticism because it would rely on sales tax monies that Metro now sends to Harris County, the city of Houston and 14 other cities inside Metro's service area.

White's plan is based on funding rail with what is left in the transit agency's bank account after it sends the money to the other local governments.

By doing that, White would reduce the amount of local spending on rail to $550 million from the $1.25 billion that Metro proposed. Both plans rely on matching federal government funding.

"My financing plan makes Metro's solutions less burdensome on taxpayers and those using bus services, without compromising the level of service described in Metro's rail plan through 2025," said White, a Houston businessman and former chairman of the Texas Democratic Party.

"We have had gridlock on the transit debate for too long, and this financing plan can form the basis for a new consensus."

Metro's $3.3 billion plan calls for building 41 more miles of light rail and an eight-mile commuter train line to Fort Bend County. In addition, the transit agency would add dozens of new express bus routes, Park & Ride lots and other facilities by 2025.

The Metro board is fine-tuning the proposal in anticipation of submitting it to voters Nov. 4, the same day as mayor, controller and City Council elections.

But White said he is not certain that a fall referendum is the best idea. He said the board should ask local congressional leaders to acquire a place holder in future federal rail appropriations for Houston's plan, and conduct a referendum closer to 2009, when he proposes the rail project start.

White's financing plan, developed with help from former Mayor Bob Lanier and others, calls for Metro to issue $550 million in debt for rail in 2009.

Metro is nearing completion of a 7.5-mile light rail line between downtown and Reliant Park. White's plan makes no recommendation as to which of Metro's proposed rail lines should be built after that one.

Mayor Lee Brown, in his final months in office because of term limits, had not seen White's proposal Tuesday and could not address it, spokesman Jim Young said.

Metro Chairman Arthur Schecther, appointed by Brown, said he received White's proposal Monday and had not thoroughly read it by Tuesday afternoon.

"We're open to all ideas that will help us put together a system plan that the community is ready to buy into," he said. "Based on what we're hearing, people want more rail and they want it sooner rather than later. That makes a plan that does not embody those realities probably not politically viable."

White's proposal was called "anti-rail" by state Rep. Sylvester Turner, D-Houston, who narrowly lost a 1991 runoff to Lanier and plans to enter this year's race.

"(White) pays for some of the capital costs, but does not provide for a continuing revenue stream for the operational costs beyond 2009," Turner responded. "The net effect is that his proposal would bankrupt the rail system before the rail expansion starts."

Another mayor candidate, former Councilman Orlando Sanchez, said he was glad that White agreed with him about preserving the general mobility money.

City Councilman Michael Berry opposes White's plan, said Berry's mayoral campaign spokesman Chris Begala. Begala said Berry probably will return with his own proposal in two weeks.

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“Sunny outlook reverses at Metro”
Aug. 30, 2010, Houston Chronicle
By Mike Snyder

On April 15, Metro's board viewed a presentation by then-President Frank Wilson asserting that Metro had avoided the worst effects of the financial crisis gripping the American transit industry.

Board members saw PowerPoint slides showing layoffs, huge deficits and drastic service reductions in systems from Atlanta to Cleveland. The final slide pronounced: "Houston: No budget shortfall, no fare increase, no service reductions, no layoffs."

Four months later, concern about the Metropolitan Transit Authority's financial condition is mounting after board member Dwight Jefferson said last week the agency faced a $49 million budget shortfall. Tax revenues and ridership are falling, fund balances are dwindling and a crucial $900 million federal rail construction grant remains uncertain.

A number of factors, including Metro's aggressive pursuit of rail expansion in the midst of falling revenues, have placed it in a fragile position, transportation and public finance experts said.

"If Metro was a corporation, you'd be looking at junk bond status right now," said Barry Goodman, a transit consultant who was Metro's first executive director three decades ago. "They've leveraged themselves to the hilt."

George Greanias, Metro's acting president and chief executive officer, said Metro remains financially healthy compared to other major transit systems. More than 80 percent of the nation's transit agencies are cutting service, raising fares or both, and seven out of 10 are projecting budget shortfalls, the American Public Transit Association reported in March.

Metro hasn't cut staff or services and has no plans to do so, although it has slowed rail construction, Greanias said. Its last fare increase was in November 2008.

"I would say that despite the economic slowdown, despite the drop in sales tax revenues, Metro is in good shape," Greanias said.

Greanias questioned whether the $49 million figure discussed at last week's meeting represents a shortfall. The figure, he said, is the difference between the $136 million in Metro's operating fund balance at the start of this fiscal year and the $87 million balance now expected when fiscal 2011 begins Oct. 1.

Investments depleted

The $87 million is more than Metro originally projected and above the 15 percent level required by agency policy, Greanias said.

He acknowledged that the transit agency's "liquidity ratio," a measure of its ability to pay short-term obligations, has dropped below a benchmark considered by federal officials in determining eligibility for grants.

Metro's bond rating remains relatively high — Aa3 by Moody's Investors Services and AA by Standard & Poor's.

Spending on rail projects, however, is depleting Metro's investment portfolio.

The agency's 2009 audited financial report attributed these declines to spending on rail and general mobility payments, which assist cities with street improvements.

"Clearly, Metro is burning through its cash," said Steven Craig, a University of Houston economics professor specializing in public finance.

Craig said the declines in Metro's reserves are "frightening" because its growing light rail network will require the agency to spend more on operations and to pay off debt.

Metro's decision to begin construction on three light rail lines without assurance of the $900 million federal grant was aggressive and risky, Craig said. Metro had expected the grant to be finalized in April

Greanias said FTA authorized it to proceed with certain projects, which he said historically means that an expected grant is forthcoming. Greanias said he has instructed his staff to review how Metro would respond if the grant is delayed much longer or even rejected.