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Dominic Anthony Walsh\/Houston Public Media<\/p>\n
The East Water Purification Plant serves more than 2 million residents in the Houston area.<\/p>\n
S&P Global \u2014 one of the “big three” credit ratings agencies \u2014 lowered its outlook on the financial health of Houston’s combined water and wastewater utility system (CUS) this week, two months after Mayor John Whitmire’s administration implemented major reforms to the city’s finances.<\/p>\n
As Houston faced another crushing deficit in its $3 billion general fund \u2014 which supports core services like public safety, parks and libraries \u2014 city officials moved the more than $100 million solid waste department into the utility system. The mayoral administration also implemented an annual charge on the utility for using municipal infrastructure, moving another approximately $100 million into the general fund. <\/p>\n
All told, the changes essentially erased the more than $200 million general fund deficit for the 2027 fiscal year, but they also ate into the utility’s more than $1 billion fund balance \u2014 essentially its cash-on-hand savings account.<\/p>\n
Sign up for the Hello, Houston!<\/a> daily newsletter to get local reports like this delivered directly to your inbox.<\/p>\n Jaime Blansit, associate director at S&P Global, said the negative outlook for the city\u2019s utility system “is really focused on the uncertainty of where they plan to go with their future financial position.”<\/p>\n “We don\u2019t have a clear plan of attack from the utility on how they\u2019re going to absorb those additional costs,” Blansit said. “Are they going to increase rates on the customers to kind of align revenues and expenditures that way? Or are they going to draw down on their liquidity reserves \u2014 their cash on hand, if you will \u2014 in order to basically just absorb this through their very flexible cash position.”<\/p>\n RELATED: What does Whitmire’s budget mean for Houstonians’ bottom line, city’s financial future?<\/a><\/p>\n The negative outlook signaled a possible downgrade in the utility’s credit rating, which would increase the cost of bonds and potentially lead to additional water rate hikes for customers. <\/p>\n The administration does have a path toward bringing more revenue into the utility system. <\/p>\n For the first time this month, households receiving garbage and recycling services from the city of Houston will begin paying a $5 monthly fee<\/a> on their water bills, which could ramp up to as much as $25 in the coming years. City officials have expressed reluctance to escalate the fee to that level, but it would likely cover the cost of solid waste services, according to a rate study released by Whitmire’s administration. <\/p>\n Dominic Anthony Walsh \/ Houston Public Media<\/p>\n A newly purchased recycling truck unloads at the city\u2019s recycling plant in late September.<\/p>\n The administration has also pledged to implement “efficiencies” in solid waste operations in an effort to reduce costs. <\/p>\n “It\u2019s going to be proof in the pudding,” Blansit said. “We\u2019re going to want to see in the next couple years where you take that system.”<\/p>\n RELATED: S&P Global improves outlook on city of Houston’s finances<\/a><\/p>\n S&P Global’s move on Tuesday came a few weeks after the ratings agency improved its outlook for the city’s general fund, citing “substantial progress in materially reducing its budget gap \u2026 through various structural changes.”<\/p>\n And in a significant boost last week<\/a>, Moody’s \u2014 another of the “big three” ratings agencies \u2014 improved the city’s credit rating, pointing to “swift and recent implementation of recurring and meaningful revenue enhancements and expenditure realignments, which materially reduced budgetary gaps and improved financial flexibility.”<\/p>\n Related: What the city’s first credit rating upgrade in years could mean for Houstonians<\/a><\/p>\n “That\u2019s good news because a stronger credit rating should lower our cost of borrowing and preserve taxpayer dollars for other priorities,” City Controller Chris Hollins said on Wednesday, “but every dollar has to come from somewhere.”<\/p>\n He argued the shifting of expenses and revenue between the general fund and utility system represented “no new money being created, just moving money from one pocket to the other.”<\/p>\n Dominic Anthony Walsh \/ Houston Public Media<\/p>\n Houston Mayor John Whitmire speaks about his proposed budget on May 5, 2026.<\/p>\n Throughout the budgeting process in May and June, Hollins sparred with Whitmire over his administration’s plan. The city council ultimately approved the budget<\/a> in a 15-1 vote. <\/p>\n Whitmire’s administration will “continue our dialogue with S&P,” finance director Melissa Dubowski told city council members on Wednesday. <\/p>\n “We, of course, remain committed to sound financial management, responsible planning and maintaining the strong credit,” she said. <\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/us-tx\/wp-content\/uploads\/2026\/03\/IMG_3452-1000x667.jpg\")
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