Houston’s deficit could spike to $27M under cable bill
The city of Houston’s deficit would spike by up to $27 million, widening its already massive budget gap, under a bill that aims to limit fees telecommunication and cable companies pay cities to use their right of way, Mayor Sylvester Turner warned this week.
Senate Bill 1152, authored by state Sen. Kelly Hancock, R-North Richland Hills, would eliminate what the bill’s proponents say is a redundant double tax on companies who pay fees for cable and phone lines, despite transmitting those two services over a single line. Hancock’s bill would require companies to pay either their cable franchise fee or right-of-way access line fee, exempting the lesser charge.
“These companies are essentially being double-taxed to provide the service to the people in the cities that want to use their services, and it ultimately ends up costing the consumer more,” Hancock said.
Those who oppose the bill say it would not compel cable companies to delineate the fees they charge as line items in customers’ cable bills. Without that requirement, opponents say companies would have no incentive to charge customers correspondingly less once the companies begin paying cities lower franchise fees.
The bill’s opponents also contend that companies are charged for phone and cable services because they profit from both.
“If the bill doubles not because it’s a combination of more cable services, but because it’s cable services plus phone services, using those exact same facilities, then the bill increases because the use of that facility is more valuable,” Don Knight, a Dallas assistant city attorney, told the Senate Business and Commerce Committee earlier this month.
Hancock’s bill has passed out of that committee, and its companion legislation, House Bill 3535, is scheduled for a hearing Monday before the State Affairs Committee. The bill’s author, state Rep. Dade Phelan, R-Beaumont, chairs the committee.
The main sticking point for the bill’s opponents — primarily city officials — is the financial hit they say it would deliver to cities’ general funds, which typically underwrite public safety, waste management, libraries and parks, among other areas.
Turner has said Houston would take a particularly big hit because the city already operates under a vote-imposed revenue cap and faces a projected $197 million budget deficit that has been widened by Proposition B, the November referendum that grants firefighters the same pay as police of corresponding status and would cost Houston at least $80 million, according to city estimates.
Dallas, meanwhile, would lose about $9.3 million in revenue, while San Antonio’s revenue would fall by about $8 million, according to estimates from both cities. When presented with Dallas’ estimate at the business and commerce committee hearing, Hancock, the bill author who also chairs the committee, was skeptical that the cuts would require public safety layoffs.
“The problem I have is their budget is $1.37 billion,” Hancock said. “...$9.3 million out of a $1.37 billion budget, it’s hard to believe they’re going to go immediately and fire fire(fighters) and policemen.”
Houston, meanwhile, would lose $17 million to $27 million in annual revenue, Turner said. Officials in his administration said the loss would require city layoffs.
The mayor’s plan to fund Prop. B, which did not come with a funding source, will already require the city to employ 378 fewer firefighters next fiscal year, according to Fire Chief Sam Peña. Turner also has asked city departments to cut their budgets by at least 3 percent, which would produce about 100 municipal layoffs.
If the bill becomes law, Turner said, it would have “a huge adverse impact” on Houston. The mayor acknowledged that Comcast and AT&T would stand to benefit from the bill, but he said company executives had told him they did not push for the legislation.
“My ask is that they will look at the impact that this bill will have on the city as a whole, on their customers, on their business operations, and on fire and police and municipal workers,” Turner said.
Still, the bill’s advocates contend that the dual fee is outdated, in part because they say cities are not additionally burdened when they provide right of way for phone and cable services that are now transmitted over a single line.
Walter Baum, president of the Texas Cable Association, noted that people who stream shows on Netflix, for instance, do not pay the same fees as those who subscribe to cable.
“With customers accessing video and voice in so many different ways, we believe this update is needed,” Baum said.
Cities have collected franchise fees from telecom companies since 2000, while collecting cable fees since 2005. Houston officials noted that the city has not raised its franchise rates in more than 10 years, while collecting less revenue from franchise fees than it did a decade ago.
Houston and San Antonio officials also argue that the bill would provide disproportionate benefits to the largest telecom companies, which are generally the ones who pay cable franchise fees and right-of-way access line charges.
“There are concerns that the bill will … give the large joint telecom and cable companies a competitive advantage against the small telecom companies,” said Russell Huff, San Antonio’s assistant finance director, when testifying before the business and commerce committee.
In a letter to Hancock, Turner also contended that the legislation violates the Texas Constitution by allowing companies to “gift” public property to companies who would be exempt from one of the fees.
Turner also wrote that the bill would make it difficult to set annual budgets because cities would collect different amounts of revenue from providers each year and be given little time to adjust if they under-budget. Yushan Chang, a Houston assistant city attorney, also contended that right-of-way access in major urban areas should be valued differently than in less densely populated cities — which she said the bill does not do.
Otherwise, officials who say the Legislature is already squeezing municipal budgets through proposed revenue caps believe the bill imposes further unreasonable belt tightening.
“$8 million is a big hit to our general fund any time,” said Jeff Coyle, San Antonio’s director of government and public affairs. “But in a legislative session where they’re already talking about capping our property tax revenue growth at 2.5 percent, another $8 million on top of that is devastating.”