in Houston, Texas

Houston inspector general probing Councilman Stephen Costello's engineering work for city; firm inked $1.7m contract two months before Costello elected

Wednesday, Mar 23, 2011, 11:47AM CST
By Steve Miller
Houston City Hall

Houston City Council member Stephen Costello and his engineering firm's ongoing contract with the city are under investigation by the city’s Inspector General’s office, records obtained by Texas Watchdog show.


Costello Inc. signed a $1.7 million contract to fix water lines in the Memorial Plaza, Shadywood and Regency Square areas of the city in October 2009. He was elected to council in December of that year.


Costello, chairman of the city’s Flooding and Drainage Committee, did not return a call, but a representative of the councilman defended the contract, which Costello disclosed on a conflict-of-interest filing last February.


(Editor's note: See update to the story by clicking here.)


"He had said that if he won, he would not go after city contract work, and he has not done so," said Kathryn McNiel, a consultant to Costello. When he won the bid, Costello had no idea that he would win, McNiel added.

Stephen CostelloCOSTELLO

But opponents of a long-term, $8 billion city drainage project known as Renew Houston, which will be paid for with new fees on property owners, question Costello's close ties to the engineering and construction trades.

“We had seen enough information throughout this process of Renew Houston over the months that raised questions about Costello’s role,” Dave Welch, executive director of the Houston Area Pastor Council, said. “His support for Prop 1 financially and the overlay between his professional work, and we wondered if he had any current active contracts with the city. It turns out that he does.


"And we aren’t sure that he should be able to have a stake in setting our taxes when it could benefit him.”


It's not clear whether Costello's contract just creates the appearance of a conflict or constitutes a violation of ethics rules.


A passage in city law speaks strongly to the issue of council members getting city business: City Council members shall not "be pecuniarily interested, directly or indirectly, in any contract let by the city, or in any work done by the city, or in any matter wherein the rights or liabilities of the City of Houston are or may be involved."


However, a mayor's office spokeswoman said she "believed" the investigation had been completed and found no wrongdoing, but the office could offer no further documentation of that at press time. A phone call to the city attorney's office was not returned.

The investigation stems from public comments during one of a series of community meetings this year about the implementation of Renew Houston, which was approved by the voters in November. The meetings were attended by Mayor Annise Parker, who, along with Costello and a large portion of the city's engineering firms, advocated the plan.

Parker was met with a series of questions concerning the tax implications of the measure, and about Costello’s engineering contract. The mayor confirmed the investigation in an email to Welch. Shown the email, the mayor's office confirmed its legitimacy to Texas Watchdog.

Welch's group and others have said that churches and local schools should be exempted from the drainage fees, just like they are from certain taxes, and state legislation has been proposed to carve out an exception for those groups. The mayor has said she believes everyone should pay.


Shortly after his election, Costello became an advocate for Renew Houston, which appeared as Proposition 1 on the ballot. He was joined in his support by a number of local engineers who had collectively made more than $12 million from the city in the previous five years for their work on city projects.


Costello loaned $80,000 of his own money to the Renew Houston effort, and Costello Inc. donated another $11,889, according to election records.


The plan will levy a tax on residents and businesses to fix infrastructure in the city, including water lines and streets. City council members have not yet decided the exact fee rate, but during the runup to the referendum backers said it would cost the average homeowner about $5 a month.

The city in December announced a new inspector general, Robert Doguim, who came armed with a revised ethics policy at the behest of City Attorney David Feldman. Parker issued an executive order on March 1 outlining the responsibilities of the inspector general’s office.


Contact Steve Miller at 832-303-9420 or

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Photo of Houston City Hall by flickr user J Jackson Photography, used via a Creative Commons license.

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