Farouk Shami Perpetrates Misinformation Regarding Houston's 2010 Budget

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A few weekends ago you'll recall that Democratic candidate for governor Farouk Shami appeared on WFAA's Inside Politics in the Dallas/Fort-Worth media market.  Shami took a swing at his primary opponent, Houston Mayor Bill White, that most folks may have missed but that I caught and have been looking into.  

Oftentimes in campaigns a great deal of misinformation gets bandied about that if not nipped in the bud immediately can eventually become what I like to call a political myth—which is to say, a lie.  Look no farther than the 2009 debate on reforming our country's health care system and how Republicans went out of their way to lie about important elements of emerging legislation.

During his interview with WFAA's Brad Watson, Shami made the following remarks when asked about platform specifics such as balancing the upcoming state budget in 2011 or how he'd create jobs:

By creating more jobs here.  When you create more jobs you are creating more taxpayers and that is the only solution to create money is to create jobs.  The current people in this state with the current governor, a Republican, not doing anything about it.  Neither is the candidate from Houston.  He is on the verge of bankrupting the city.  We need to get rid of those things that really delays our budget and put us in a worse recession that we are in.

Farouk Shami made the claim that Bill White has bankrupted the City of Houston and the fact is that Farouk Shami is wrong.  He perpetrated misinformation similar to what the Texas Observer did, which then had to backtrack quickly once facts blew holes in their disappointing reporting.    By Municipal Law Houston, much like our state, must balance its budget each year.  Houston cannot carry a budget deficit.  And, even despite Rick Perry and Republican claims that they don't want any of Washington's money—yet use them to balance our state budget, federal stimulus dollars can't balance Houston's budget like they did Texas' fiscal budget.  Houston Mayor-elect, and current comptroller Annise Parker noted in a letter back in November that a projected budget shortfall of $106.4 million exists; however, in reality only a $3.3 million gap remains to be closed in Houston's fiscal budget for 2010.  Without going into too much budget wonk you can read the Houston Chronicle's excellent breakdown of the budget numbers here.

The facts are that due to the fiscally responsible leadership of Mayor Bill White since he took office in 2003 the City of Houston is better positioned to overcome the same revenue shortfalls that other major cities across the United States are experiencing, but unable to overcome.    

Since 2003 Mayor Bill White has more than doubled Houston's reserves from $85 million when he took office to $172 million today.  Part of the projected 2010 revenue shortfall will be made up by using the city's Rainy Day Fund.  Frankly, this is exactly what a Rainy Day Fund is for and demonstrates sound fiscal stewardship and overall foresight on the part of White to build up that fund for situations just like this.  

The $3.3 million dollar gap out of a $2 billion dollar city budget will be made up by contract renegotiations, cuts in non-essential city services, budget trimming, and cost savings initiatives such as payroll management and combined utility systems.  

Moreover, Mayor Bill White is leaving Houston Mayor-elect Annise Parker a drafted 2010 budget that will continue and steer the city through its current economic recession and not compromise essential city services.

It is flat irresponsible of Farouk Shami and other credible publications to perpetrate misinformation.  Now that you have the facts you can help dispel these political myths.      

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8 Comments

  1. Farouk Shami
    Great reporting.  I'm not sure this will be Shami's last shot to Mayor White, because as far as I can tell, Shami's got no basis from which he can win the election anyway.

  2. Excellent work, Todd!
    You are absolutely right that political lies must be nipped in the bud before they gain momentum.

    Mr. Shami, you have some explaining to do.

    So how about in honor of the American soldier, ya quit making things up?

                                                                                   – Sarah Palin, chronic liar, July 26, 2009

  3. Longtime Texan on

    Farouk Shami Fact Check
    Farouk's presentation has traditionally been a bit of “over-reaching” like the Beauty Shows he has been organizing as a part of his business.

    Farouk in San Antonio (10/21/09): “I manage business in 106 countries, I have tens of thousands of employees, and we've brought billions of dollars to the state of Texas,” Shami said. “Leadership is building a team, and I know how to build a team.”

    Fact Check:

    • Farouk manufacturers the products and sells them to independent distributors (in US and overseas), who in return sell to the salons. He DOES NOT manage these companies.

    According to his claims, Farouk Systems is a (multi)billion dollar company with thousands of employees; however Hoover's reported the 2008 revenues as $27.4 million with 150 employees and Houston Business Journal reported his revenues as $37.5 million – some other reports show the revenues in the $50-60 million range with 400 employees – this is before CHI operations were brought to US for which he received $10 million or so as economic assistance to create $8.00/hour jobs – However, Farouk has always counted his revenues in the following manner:

    • Not what he sold to the distributors (his revenue)

    • Or what the distributors sold to the salons (with100% markup)

    • But what economic activity the salons created by selling and using his products, i.e. salon retail (with another 100% markup) and service revenues (product cost 10%)  

    • As to number of employees, Farouk has counted all the part-time educators (independent salon owners and hairdressers) who conduct training classes and work the beauty shows (scheduled by the distributors) as his “employees”, since the company pays for their fees & expenses – these are temporary and very part-time contract workers, not full-time employees on his payroll

    Yes, Farouk has done well for himself BUT… He is NOT the sole owner of his companies – Farouk claims (as well documented in many articles and interviews, and then repeated by the media) to be a Billionaire; however he is NOT listed on Forbes List of Billionaires – with his ego, he definitely would make sure that he would be listed if he just could prove it.. (John Paul DeJoria of Paul Mitchell, technically not a hairdresser, is listed as #261 with $2.5 billion)  

    Farouk's management philosophy includes

    • “I conceived it, thus it's done”, i.e. making a decision tonight and fully expecting it to be implemented before he even talks to anyone – it works in a small entrepreneurial organization where he has the total control and it is his own money – However, how would it work in our democratic form of government?

    • In his culture (and business practice) – “cousins” (anyone with Middle Eastern heritage) make no mistakes and family “walks on water”

    • Texas Governor has great powers to make key appointments – How may “Cousins” would we like to have in control of the affairs of the State?

    Farouk can put up a fancy show – that is what he has been doing for living – Beauty Shows

    P.S. Farouk is claiming to be “BROWN” in order to pander to his Hispanic workforce (80-90%) and other minority groups; however according to US Census criteria as a Palestinian he is WHITE, not a member of any minority group.

    Having attended Quaker School does not make Farouk a Quaker – maybe that is all what was available at the time (or even today) for quality education in Ramallah.

    • Wikipedia: “The Friends School currently serves as the School for the best and the brightest. It is well known to educate the children of Palestinian elites.”

    • MilitantIslamMonitor: “Guilford College controversy Being Manipulated By CAIR -Quaker school tied to pro terrorist Friends school in Ramallah”

  4. Thanks for Posting this, Todd
    I noticed the claim by Shami, too.  It's an attack that Republicans have used a tad bit, too.  And we need to ensure that everyone knows the truth of Bill White's fiscal responsibility if he becomes our nominee.

    I doubt this will stop the Republican nominee from bringing it up.  But the more we can dispel the myth, the better.

  5. At his announcement event
    in Austin – he made some similar erroneous claims about the City of Houston. I think the Texas Tribune reported on that – maybe in one of their youtube things with the thought bubbles.  

  6. Flat Iron Farouk
    Funny, you would think the guy who invented the ceramic flat iron would be the be one to give accurate information.  

    We will have to see how he straightens this out!

  7. Texas Observer and Farouk Shami
    I'm actually more concerned about the Texas Observer article… I expect Farouk to use whatever he can find as ammunition, because hopefully he's in it to win (not that I think he will).

    The Texas Observer is supposed to report facts. The article Bob Moser posted needs an apology on their front page, not just a “correction”.

  8. Easing the Time Bomb
    It sounds like White did not ignore the problem, and at the very least, he eased the problem.  A couple excerpts from Texas Monthly's The Great White Hope:

    White has also made the most of the economic boom time that coincided with most of his tenure. He balanced his budgets every year – meaning that the city did not borrow to pay for operating expenses – and used the additional revenue both to cut property tax rates five times and to build up the city's surplus fund, all while increasing key city services. When recession-bound Houston faced a $101 million shortfall this year due to declining revenue, he bridged the gap in part by drawing down on that surplus. White and his council also strengthened the city's wobbly municipal pension fund by both significantly reducing benefits and upping the amount the city contributed to the system. These moves were not without controversy. Many people believe that the pension system will need further shoring up through increased employee contributions, and White himself acknowledged in a staff memo that “the recent downturn in the value of investments for all defined pension plans … can pose challenges for the future.”

    and later,

    His skills became apparent in the early months of his administration in 2004, when White discovered what amounted to a time bomb embedded in the municipal pension system. The city, as it turned out, had accidentally been too generous. The pension board had originally estimated that funding the pension plan would consume about 15 percent of the total payroll for this group. White figured out that the pension fund was going to eat an astonishing 52 percent of the payroll. His subsequent retooling of the pension system – which included passing a city wide referendum – was one of his first successes as mayor.

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