Houston area’s growth is unsustainable without government reform, new report says

Rice University
Office of Public Affairs / News & Media Relations

NEWS RELEASE

David Ruth
david@rice.edu
713-348-6327

Amy McCaig
amym@rice.edu
713-348-6327

Houston area’s growth is unsustainable without government reform, new report says

HOUSTON – (Oct. 25, 2018) – As the Houston region continues to grow, its local governments are struggling to provide services to residents in an equitable and cost-effective way, according to a new report from Rice University’s Kinder Institute for Urban Research.

“Governing a Growing Region: Addressing Challenges of Service Provision and Development in Houston” highlights how cities, counties and municipal utility districts (MUDs) relate to one another and provide services around a rapidly expanding metropolitan area. The report centers on Houston, its extraterritorial jurisdiction and Harris County.

Reforms should be considered to sustain growth and ensure long-term stability of services for residents, the report said. It was authored by Kinder Institute researchers Kyle Shelton, Carlos Villegas, Bill Fulton and Matthew Krause in conjunction with TischlerBise, a fiscal and economic planning consulting firm.

Current systems of providing roads, flood control, public health, courts, law enforcement and quality of life services have been a vital consideration throughout the sustained growth and expansion of the region, the report says. MUDs have played an important role by filling in gaps, the researchers say, particularly after the breakdown of the city of Houston’s annexation system.

But this patchwork of regional entities has delivered piecemeal service to different neighborhoods and created problematic-constraints on revenue and power. As a result, Harris County and the city of Houston can no longer meet the demands of a growing population and provide a consistent, equitable level of service throughout the region.

“Part of what we’re encountering is that the region is growing really quickly and growing through unique districts which allow people to settle outside of cities,” said Kyle Shelton, director of strategic partnerships at the Kinder Institute.

“In the long term, MUDs are balancing the pressure to maintain or grow property tax rates in order to preserve and upgrade long-term infrastructure with the demand from residents to lower property tax rates,” Shelton continued. “MUDs have become more like general-purpose governments, although this was never intended to be their purpose.”

In addition, the city of Houston faces long-term financial problems, he said.

“These issues impact everyone, whether they are individuals living in the city limits or individuals in unincorporated areas,” Shelton said. “Like all urban counties in Texas, Harris County is expected to provide municipal services outside MUDs and some services inside MUDs — even though it does not have the taxing and ordinance power necessary to provide those services.”

According to the researchers, improving the area’s system of service provision will require the following issues to be addressed:

• Urban counties do not have adequate revenue sources or statutory powers to provide services residents want in dense, unincorporated areas.
• Cities control development standards in massive areas of extraterritorial jurisdiction, but they provide few services to these regions. That limits other entities from addressing growth and service demands.
• Municipal taxpayers pay county taxes equal to those in unincorporated areas and receive some county services such as health care, flood control and law enforcement. But county governments focus their efforts on unincorporated areas, giving short shrift to taxpayers living inside city limits.
• Lower-income unincorporated areas that are not part of cities or special districts face obstacles to improving infrastructure without access to additional revenue. The burden of serving these communities falls on county governments.
• Older MUDs with imminent infrastructure problems face the difficult choice of raising taxes or seeking public assistance.
• MUDs allow residents to support their own service needs with property taxes, but unlike taxes generated inside Houston, their financial resources are not used to support services across a wide range of communities.

The report is intended to help Houston-area government officials consider reforms ensuring long-term stability for all residents of the Houston region.

Researchers conducted interviews with several experts on regional governance from cities, counties, MUDs and other special districts. They also analyzed more than 30 years of data about special districts and their finances. This information was collected by Municipal Information Services, Inc., and the analysis was conducted by the Kinder Institute and consultants from TischlerBise. Unless otherwise noted in the report, the numbers and statistics that describe MUDs are for tax year 2015, the last year of available data in the full district database used for this analysis.

The report was funded by Houston Endowment and the Kinder Foundation. A copy is available online at https://bit.ly/2qbfOUk.

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For more information, contact Amy McCaig, senior media relations specialist at Rice, at 713-348-6777 or amym@rice.edu.

This news release can be found online at http://news.rice.edu/.

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