Houston\u2019s credit rating improved Tuesday as the city\u2019s recent budget changes and declining pension liabilities strengthened its financial flexibility, according to the rating agency Moody\u2019s.<\/p>\n
The upgrade comes after city council adopted Mayor John Whitmire\u2019s budget for the fiscal year that started July 1, erasing a $180 million budget gap<\/a> in part by shifting the Solid Waste Management Department into Houston Public Works, charging a new $5 monthly trash fee and pulling utility revenues into the cash-strapped general fund.<\/p>\n Whitmire said in a statement that the ratings are a \u201csignal that Houston is moving in the right direction.\u201d<\/p>\n A higher rating generally lets governments borrow money at lower interest rates, reducing the cost of financing big projects and ultimately saving taxpayers money, said James Thurmond, a professor at the University of Houston\u2019s Hobby School of Public Affairs and a former city manager.<\/p>\n \u201cRating agencies give a rating to the city so that the investors \u2014 the people that buy the bonds \u2014 have a good sense of if it\u2019s a good investment or not,\u201d Thurmond said.<\/p>\n Moody’s upgraded the city’s key ratings from Aa3 to Aa2.\u00a0<\/p>\n \u201cThe upgrade \u2026 reflects Houston\u2019s swift and recent implementation of recurring and meaningful revenue enhancements and expenditure realignments, which materially reduced budgetary gaps and improved financial flexibility,\u201d the Moody\u2019s report said.<\/p>\n In 2016, Moody downgraded<\/a> Houston\u2019s credit rating from Aa2 to Aa3 due to low oil prices, declining sales tax revenues and unfunded pension obligations. The agency shifted the city\u2019s credit outlook from \u201cnegative\u201d to \u201cstable\u201d following pension reforms in 2017<\/a> but left the rating unchanged.\u00a0<\/p>\n “Improving our financial position has been a priority of this administration,\u00a0and this upgrade reflects the progress we have made,\u201d said Whitmire, who took office at the start of 2024.\u00a0<\/p>\n Maintaining the higher rating, Thurmond said, will depend on whether the city\u2019s recent budget changes prove sustainable over time.\u00a0<\/p>\n While Houston shifted solid waste costs to its utility system, he said the city will likely need additional recurring revenue in the future to fully support those costs.<\/p>\n