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Houston controller reports $328.1M fund balance; urges higher reserves ahead of convention center financing
Summary
City controller presented the monthly financial report showing an estimated $328.1 million ending fund balance (12.9% of expenditures) for FY2026 projections, warned reserves remain below many peers, and discussed interim borrowing by Houston First for the convention center expansion. Council voted to accept the report.
The city controller's office presented the monthly financial report for the period ending July 31, 2025, reporting a projected ending general fund balance of $328,100,000, equal to 12.9% of expenditures (excluding debt service and pay-as-you-go items). The council voted to accept the report.
The controller said that the office's projection is approximately $17.5 million lower than the finance department's projection, citing a lower revenue projection as the primary reason. The report notes the controller's office projection remains about $137.6 million above the city's stated target of holding 7.5% of estimated expenditures (excluding debt service and pay-as-you-go).
The controller highlighted key revenue changes behind the update. Property tax revenue was upwardly revised by about $43.9 million following a revised population estimate from the U.S. Census Bureau (as of July 1, 2024). Transfers from other funds increased by $9.6 million, primarily because of reimbursements related to TRS '24, and interfund transfers rose about $1.3 million, including reimbursements from the airport following Houston Police Department pay raises. Sales tax receipts for June 2025 totaled $84.3 million, roughly $7.6 million (9.9%) higher than June 2024; fiscal year 2025 sales tax finished at $919 million, about $36 million (4.1%) above FY2024.
The controller's presentation also described the city's approach to variable-rate debt, noting a practice of keeping no more than 20% of outstanding debt of each type in variable-rate form. At July 31, 2025, most debt classes were within that guideline; however, the convention and entertainment category had 43.78% in variable-rate exposure. The presentation attributed that elevated interim exposure to Houston First drawing $200 million in interim financing for design and feasibility work on the upcoming convention center expansion. The controller said permanent, fixed-rate financing is expected to close in January 2026 and that Houston First's variable-rate exposure should revert toward historic levels after permanent financing closes.
Beyond current balances, the controller urged strengthening the city's disaster readiness and general fiscal resilience. The controller referenced an insights report delivered to the Budget and Fiscal Affairs Committee titled “Weathering the Storm,” and recommended three measures: raise the minimum reserve requirement, protect the rainy-day fund from non-emergency drawdowns, and direct year-end surpluses and clawbacks into emergency savings.
Council members asked that staff compare Houston’s reserve practices with peer cities and identify revenue options other cities use (trash fees, utilities, etc.) to see whether comparable frameworks might be feasible in Houston. Finance staff indicated they would refresh prior analyses and coordinate with the finance department and outside advisors.
The council voted to accept the monthly financial report.
