"The rich rules over the poor,
And the borrower is servant to the lender."
(*) -- Hoperfully
Following the ruinous fiscal legacy of the former mayor, the inevitable finally happened:
Moody's Investors Service has downgraded the City of Houston's (TX) general obligation limited tax rating to Aa3 from Aa2, affecting approximately $3 billion in previously issued bonds. Concurrently, Moody's assigns a Aa3 to the City of Houston, TX's $600 million Public Improvement Refunding Bonds, Series 2016A. The outlook remains negative.TPPF has more:
The downgrade to Aa3 reflects weakening economic and financial performance driven by prolonged decreases in oil prices. It also reflects the city's high fixed costs, large unfunded pension liabilities (among the highest in the nation), as well as property tax caps.
The Aa3 also considers recent positive General Fund performance, and growth in non-energy sectors that has offset some of the softening. Additionally, the rating recognizes the positive actions taken by the new Mayor and his plan to engage several stakeholders to modify the city's fixed costs and generate additional revenues, all within the next 18 to 24 months. These plans signal a change from past initiatives, and positive movement on the plans will be key to stabilizing the credit profile.
"Moody’s downgrade of Houston is the latest in a series of troubling fiscal incidents that, show how urgently reform is needed. Houston’s booming economy has helped mask the city’s spending and pension problems for a long time. But the city’s big-spending ways can no longer be ignored. It is time that the city got a handle on spending and put its fiscal house in order."