Houston Matters

Houston Controller candidate Dave Martin on how he would plan ahead for city’s ‘fiscal cliff’

Dave Martin is a term-limited city councilor and Mayor Pro Tem. Martin says unlike other controller candidates, he actually has experience in accounting.

City Controller candidate Dave Martin
Dave Martin campaign
City Controller candidate Dave Martin

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As the City of Houston's elections get closer, Houston Matters with Craig Cohen is offering listeners a chance to speak directly with candidates. As part of the series, Cohen interviewed District E city councilor and Mayor Pro Tem Dave Martin, who is running for Houston Controller.

As controller, the elected official acts as the city’s chief financial officer. Duties include: certifying the availability of funds before City Council approval of city commitments, processing and monitoring payments exceeding $1 billion annually, investing the city's funds, conducting internal audits of the city's departments and federal grant programs, operating and maintaining its financial management system, conducting the sale of public improvement and revenue bonds, and producing an Annual Comprehensive Financial Report.

Martin is running against three candidates: former council member and Harris County Treasurer Orlando Sanchez, current deputy city controller Shannan Nobles and former Harris County Clerk Chris Hollins. They are all running to replace outgoing city controller Chris Brown, who is term-limited.

This interview has been edited for length and clarity. Questions from Houston Matters will be in bold. For the full interview, listen to the audio above.

HM: You are also term-limited as a council member. I suspect most of our listeners know you from that role. You have also worked at accounting firms, in what capacity?

Yes, I worked for Ernst and Young and PricewaterhouseCoopers for a number of years when I moved over here from New Orleans many years ago. Also worked for a company called Marsh and McLennan Company, which is a business risk firm. You know, if you look at the city controller’s office, it’s the most, my opinion, the most mundane and misunderstood department in the city. It doesn’t fix streets, it doesn’t handle potholes and pick up garbage; it protects your tax dollars. It’s a finance and accounting job. I am the only one in this race that has extensive, private sector finance and accounting experience, and business risk experience. And when I look at this opportunity, Craig, this is the end of the road for me. I’m not interested in being the mayor. I go to the end of the road. I’m term limited. I will have served 11 years as City Council member, and mayor Pro Tem for the last four years. Many people have used this, and are using this as a stepping stone. I’m done. This is a controller's office. I’m a finance guy. I never wanted to be the mayor, never wanted to be a congressman, a senator or representative. And I’m going to do the best job implementing solid fiscal policy into the city of Houston and making sure we protect the integrity of your tax dollars.

HM: Just to clarify though, what were the jobs that you did at those accounting firms?

At Ernst and Young, I worked with Compaq computers. We had a team of about 30 people there. We did that day in and day out, handling their audit. We did assurance work, we did tax work, we did something called transfer pricing because Compaq had overseas operations, and you had to transfer the pricing overseas into American dollars. Also did similar things when I was at Price Waterhouse Coopers many years ago as well. So done a lot of accounting work, done a lot of finance work done, a lot of insurance work and that’s what this job is all about.

HM: The job also entails sometimes telling the mayor and City Council the city doesn’t have the money to spend on something that they want to, unless money is pulled from something or somewhere else. Are you prepared to do that?

Absolutely. If you look at the present position of the city of Houston, Craig, we have $450 million in fund balance. That’s about 19% of expenses we’re required by statute and city ordinance to keep 7.5%. So we’re going to turn over this city to the next mayor with a very large surplus of cash. Now, a lot of that was related to ARPA and COVID funds from the federal government. But we’ve also been able to reduce pension debt from $8.2 billion in 2016 to today it’s at $2.2 billion. That’s a 75% decrease. also on the other post-employment benefits, traditionally, medical coverage. I passed an amendment this year to put an extra $10 million into that fund to reduce the liability on OPEB. In 2016, before Turner took office, before we went to the state for pension reform, this city was on the brink of bankruptcy because of one thing: outstanding obligations -pension obligations, and OPEB obligations. That’s why we went and worked with the state to get pension obligation bonds issued in 2016, and we’ve been able to do a great job with that. So the city is in great shape today. What happens over the next year, the next 18 months? My analysis shows that in fiscal year 2026, which begins for us on July 1, 2025, we will hit what I call the fiscal cliff, where your expenses exceed the revenue. So in order to do it the right way, you have to prepare today for the next 18 months. You have to cut back on expenses. You have to look at great sources that you can provide expense reductions from and maybe you look at something that can reduce the pension liability even more of the OPEB liability even more, which is why we put that OPEC trust account in place.

Caller Danielle from Kingwood: Since he’s running on his extensive resume in finance and accounting, what are some new tools he plans to implement as controller?

The number one tool I’m going to implement is I’m going to hire a forensic accountant. Accounting and audits are done in two fashion: financial accounting and forensic. Forensic is the investigative side. Forensic can identify fraud and corruption. A lot of people out there on the street say, ‘federal government. State government, local government. They’re corrupt.' Well, if you have a forensic auditor in place working in the control... That’s the first thing I’m going to do.

HM: J.J. from Conroe, asks: What I’m hearing is that the controller is a glorified bookkeeper. Is that right?

That’s what it’s become. Because you have no meat in the controller’s office. You have someone that, quite frankly, if you look at it for the last number of years you had, Mayor Annise Parker was a controller. Before that, we had Sylvia Garcia. They did a great job. But when was the last time we had someone in the controller’s office that had extensive private sector, financial accounting and business risk experience? That’s why I’m running. I want to do it the right way. I want to make sure that we have the ability to be the watchdog for the taxpayers and protect your tax dollars because we have a lot of surplus right now, but that’s going to go away over the next 18 months.

HM: What does watchdog mean beyond doing that bookkeeping and stating the financial facts to the powers that be?

I’m gonna sound the alarm. Fiscal year July 1, 2025 our expenses are gonna exceed the revenue. Let’s start digging into that and make sure that we start cutting back. I’ll give you another thing. No one’s talking about but me. Senate Bill 736, while it is about collective bargaining with the fire department, and I totally believe that’s the right thing to do when you can’t reach a collective bargaining agreement, you should go to binding arbitration.

HM: Frankie writes and asks: Respectfully if our finances are secure in Houston, why can’t we settle the pension issue with the fire department?

We can, via collective bargaining, but this is Dave Martin’s opinion. The two people that have to negotiate that are the mayor of the city of Houston and the head of the Fire Department union; those two folks are dug in. They’re not having any conversations, so let’s start off fresh in January 1, with a new administration that has an open mind and let’s attack collective bargaining the way it should be. And as I told you before in Senate Bill 736, which is the John Whitmire bill, I’m OK with. If you can’t reach collective bargaining, then the fire union has their arbiter, the city of Houston, has theirs. And then there’s an independent one that sits between them and they figure it out and they implement it moving forward.

HM: The city of Houston is limited in what it can raise through property taxes by a revenue cap, which voters approved and added to the city charter back in 2004. As a result, property tax rates have been cut eight times over the last nine years for the city to remain compliant. Would you like to see that changed?

No, I love the property revenue cap. Here’s why. Your tax rate that you pay, the taxes you pay are functions of two variables, tax rate and appraisal value. Tax rate has been dropped as you said, eight out of the last nine years, but the appraisal values keep going up tremendously. So citizens, you will pay more in taxes next year in the following year because of your appraisal values. So it’s a property tax cap. Now let’s look at sales tax revenue. Sales tax revenue have been double digits for the last year and a half, mainly because of spending in COVID. But we projected in fiscal year 24, which started for us July 1 that the sales tax revenue will be down 3%. Guess what it was for the first two months, up 2 1/2%. So the delta on that is 5 1/2%. So we’re doing much better in sales tax revenue and our revenue will always be higher than our expense if we keep this going, revenue is increasing. Year after year after year, so it’s not like we’re working with less money today. We’re working with more when you combine property taxes and sales taxes.