Moody's hands City of Houston a Negative Debt Outlook, cites Pension costs. Chron.com
One of the top three credit rating agencies dinged Houston for its rising pension costs and property tax revenue cap, revising the city's general obligation debt outlook to "negative" late last week.
Moody's Investors Service affirmed the city's Aa2 rating, a high mark, but warned that the "revision to negative reflects the challenges the city faces from growing pensions costs and liabilities, which are compounded by significantly limited revenue raising flexibility, and projected structural imbalance."
In short, the City is spending too much and they don't have the potential money in the budget to address it. The reason for this limitation is the much-maligned, taxpayer-approved revenue cap.
If you listen to political officials that is.
In reality, there are two main issues driving this:
1. For years, the City of Houston has allocated its budget spending in much the same way someone who is spending other's money with no potential consequences might.
In most cases, these expenditures are designed to either curry favor with potential voters, or to reward selected constituencies. These birds are now returning to roost. The City of Houston receives an ever increasing amount of money each year. Were they a private company, with a limited budget and resources, they would be forced to belt-tighten and focus on "core" functions before going off to spend Billions on non-core services.
However, Cities and other Government agencies don't act like rational businesses and therefore there is no budget discipline. While I'm generally supportive of term limits, I'm not blind to the fact that, in Houston at least, they have lead to a dearth of long-range planning from elected officials in an effort to fill their terms via re-election and the steady erosion of public works and the pension system.
At some point, this can is going to have to stop being kicked down the road. Based on early returns on the Mayoral race I'd say the chances of this happening are slim to none. Instead, what I do expect is that the next Mayor will push for the revenue cap to be removed, and there will be enough favors promised to key constituencies that it will narrowly pass.
2. There are political interests in Austin and elsewhere who have a vested interest in maintaining the status-quo for pension rules and laws.
This is one of those things where everyone who pays attention knows what's happening, but no one wants to commit the political suicide that it would take to call out the bad actors. The fact is, there is a LOT of personal wealth a person could create for themselves provided they understand where the spigots are located.
In Texas as a whole, there are politicians who have positioned themselves in the honey hole with no real challengers to knock them off of the perch, in large part due to gerrymandering. There is also no real impetus on the TLSPM to expose this because in doing so they would lose access to the types of events where they get to hob-knob with the ruling class. For the modern day media, losing the 'in' to events of this type is often viewed as a thing worse than plagiarizing. The latter can be forgotten over time, the former is almost impossible to regain.
Before you begin to puff out your chest and reflexively slam the 'other' party for being guilty here, I should remind you that the ability to create great personal wealth off of politics knows no party affiliation and seems to be fairly dispersed among both donkeys and elephants.
Normally, I would suggest that the City be required to take a straight-razor to the budget and then make the case that, minus the Quality of Life committee, commissions for the arts and other non-core fees the revenue cap is still problematic. However, I understand that asking for an elected official to grasp the concept of fiscal restraint is akin to asking an accountant to understand abstract art. It's not in their skill set for the most part.
Instead I'll just end this by suggesting City of Houston residents grab the safety rail and hold on tight.
The ride you're about to be taken on is a bumpy one.
