Drainage litigation could reduce DDSRF transfers; Metro mobility funds to offset some general-fund costs

During the Feb. 3 Budget and Fiscal Affairs Committee meeting, members discussed ongoing drainage litigation and its potential effect on the Dedicated Drainage and Street Renewal Fund (DDSRF), including how intergovernmental agreements with Metro may offset some city liabilities.

Chair Sally Alcorn and members reviewed figures on the DDSRF, which the committee discussed in terms of an 11.8-cent property-tax allocation. Alcorn read aloud the projection on the fund's available revenue: $231,992,000 in gross ad valorem receipts, less $96,400,000 for debt service, leaving about $135,000,000 available for transfers to capital projects.

Council Member Ed Pollard questioned whether a recent appellate denial (which staff said effectively affirmed the lower court ruling) represented a final end to litigation or whether the city would seek other remedies. Finance staff said they were not prepared to answer detailed legal strategy questions and that legal counsel would be the appropriate source for litigation posture; staff said they were working to mitigate the timing of any payments and collaborating with other levels of government to manage budget impacts.

Council Member Alcorn and others noted that Metro had identified about $50 million of recurring general-mobility funds that could offset prior general-fund costs for street lighting and traffic enforcement historically paid by the general fund. Finance staff said the Metro contribution comes from Metro's general-mobility (quarter-penny sales tax) allocations the city had not previously drawn down; staff reported Metro had about $170 million set aside that the city could request draws from. Council members asked staff to provide a list of projects on the general mobility plan and further detail on whether redirecting those draws would delay or displace other planned projects.

Council Member Joaquin Martinez described the DDSRF issue as one factor increasing the FY26 budget gap, which staff earlier had estimated at around $220 million before adjustments. Committee members requested follow-up information on how Metro draws interact with Rebuild Houston programming and whether drawing down available Metro funds would be recurring or one-time.

Finance staff said annual draws from Metro are subject to the project list agreed each year by the city and Metro. The committee asked Public Works and Metro staff for additional detail on project impacts and potential timing effects.