Houston ordered to spend money it doesn't have on street, drainage improvements after losing lawsuit

HOUSTON, Texas (KTRK) -- Houston is going to run out of money within the next year -- that's the warning from the city's top finance official.

The city just lost a lawsuit over mismanaged funds. As a result, upwards of $100 million taxpayer dollars must now be spent each year on badly needed street and drainage improvements.

But there's a big catch -- leaders did not budget for it.

Houston is already spending about $200 million more than it's bringing in. Knowing that, officials appealed an earlier ruling in this case to at least try to push it off, but they just lost.

So now it's time to pay up, with money the city doesn't really have.

There may be few things more reliable in the City of Houston than our floods and our potholes.

They're both issues voters hoped to at least help fix back in 2010, approving a plan to set aside tax dollars for street and drainage improvement projects.

But soon enough, two engineers sued the city, saying it was manipulating a fund allocation formula to short change the initiative.

"The city has deprived the citizens of over $600 million in improvements ," said Bob Jones, one of the engineers who sued the city. "I'm ecstatic."

He's ecstatic because after years in court, the Texas Supreme Court ruled in his favor.

"So what does that mean for us? That means that effective immediately, the city has to begin spending an additional $100 to $120 million more on critical road and drainage projects across the city," Controller Chris Hollins said.

Hollins says the city doesn't have that money. When this fiscal year finishes in June, it's set be in a $200 to $250 million budget deficit.

"We're spending a lot more money than we're bringing in. This compounds that problem," Hollins said.

This lawsuit bumps the deficit up to at least $300 million. That's the same number that's in the city's general fund -- the equivalent of it's savings account.

"And so we have to make one of two choices and they're both difficult," Hollins said. "It's either making serious cuts to critical city services, or it's finding new revenue sources, or some combination of both."

As for concrete plans on how the city plans to make up the budget gap -- right now, there aren't any.

ABC13 is told findings from an Ernst & Young citywide audit will be released in a few weeks. Officials hope those results will help steer them in the right direction.

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