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\u201cToday\u2019s announcement shows that the FY 2027 budget recently approved by the city council and the work my administration does every day are making a difference,\u201d Houston Mayor John Whitmire said in a statement. \u201cWhile we have more work ahead, this change demonstrates that the difficult decisions we have made are producing results and strengthening Houston\u2019s financial foundation.\u201d<\/p>\n
Bloomberg News<\/p>\n
S&P Global Ratings on Thursday revised its outlook on Houston’s AA general obligation rating to stable from negative, citing the city’s “substantial progress in materially reducing” its fiscal 2027 budget gap.\u00a0<\/p>\n
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The rating agency said structural changes, which pared an initial $209 million shortfall to $25 million, along with tax revenue growth, “are likely to almost, if not fully, absorb the rising general fund expenditures” propelled by sharply increasing public safety costs<\/a> and help sustain consistent reserves that have been shrinking.\u00a0<\/p>\n “We expect these improvements, combined with the city’s robust and expanding economy, to stabilize reserves beginning in fiscal 2027,” S&P said in a report.\u00a0<\/p>\n S&P revised its outlook to negative<\/a> from stable in 2024 ahead of a GO bond sale, which raised $650 million for a lump sum payment for current and retired Houston firefighters as part of a court-approved five-year collective bargaining agreement that also boosted firefighter pay.<\/p>\n The negative outlook was spurred by budget pressures and fund balance declines due to rising debt service and salaries, according to S&P.<\/p>\n Mayor John Whitmire called the return to a stable outlook “an indication that Houston is meeting its challenges and moving in the right direction.”<\/p>\n “Today’s announcement shows that the FY 2027 budget recently approved by the city council and the work my administration does every day are making a difference,” he said in a statement on Thursday. “While we have more work ahead, this change demonstrates that the difficult decisions we have made are producing results and strengthening Houston’s financial foundation.”<\/p>\n The nation’s fourth-largest city adopted a $7.5 billion budget with “$220 million in structural improvements” for the fiscal year that begins July 1.\u00a0\u00a0<\/p>\n The budget, which includes $3.157 billion in general fund spending, was largely balanced by tapping excess revenue from the combined utility system enterprise system fund through a right-of-way fee<\/a> for its use of public property. <\/p>\n In addition, trash collection will move from the general fund to the utility system. Residential customers for the first time will pay a $5 monthly “administration fee” supplemented by a subsidy from the system. Subject to city council approval, the solid waste fee would go up in $5 increments between fiscal 2029 and 2032, when it would reach $25 and would more fully cover administrative expenses. \u00a0<\/p>\n Changes to the system’s master bond ordinance “to provide additional transparency to the market” about the revenue-raising moves would be part of a debt refunding this fall, according to Houston Finance Director Melissa Dubowski. The system, which supports water and wastewater services, had nearly $6 billion of debt outstanding at the end of fiscal 2025.\u00a0<\/p>\n