Fitch downgrades Houston bond rating
Mayor White must be very pleased that Fitch released its latest Houston bond ratings this afternoon, when they are unlikely to receive much scrutiny or attention. It's certainly not good news for the mayor who touted his financial and business acumen in the last election:
Fitch Ratings has assigned an 'AA-' rating to the Houston, Texas $57.83 million taxable general obligation (GO) pension bonds, series 2005. Additionally, Fitch downgrades to 'AA-' from 'AA' the rating on the city's $1.7 billion in GO bonds and $33.5 million in certificates of obligation outstanding. The new issue is scheduled for a negotiated sale through a syndicate managed by Lehman Brothers the week of March 7. The Rating Outlook is Stable.
The bonds are general obligations of the city, secured and payable from a limited ad valorem tax levied on taxable property within the city. Proceeds from the bonds will fund a portion of the city's annual contribution to the municipal employees pension system and will refund a $22.9 million pension obligation note.
The rating downgrade is based upon large unfunded pension liabilities that are expected to increase over the near term, and upon a revenue limitation recently approved by voters that may exacerbate pension funding problems and also challenge the city's ability to adequately fund programs serving a growing population and service area. As a result, the city's credit profile has been sufficiently altered to warrant the rating change. The Stable Outlook recognizes recent significant efforts by the city to address the pension problem from both the asset and liability side. Positive rating considerations contributing to the high-grade rating include a resilient, broad economy, a moderate direct debt burden, and adequate general fund reserves.
As blogHOUSTON has noted -- while Mayor White and his council have been preoccupied debating a citywide smoking ban -- the city's municipal employees pension plan still suffers from a massive underfunded liability, to the tune of $850 million. Also, although most local press celebrated Mayor White's efforts in trimming the unfunded liability, it is worth pointing out that much of the "trimming" was a result of transferring the "asset" of the Hilton Americas Hotel to the fund -- and that given the recent performance of downtown hotels, that may well be more of a liability than an asset down the road.
There is some good news in the Fitch report:
Evidence of a rebounding local economy is provided by sales tax revenue collections, which registered a nearly 8% increase in fiscal 2004 after declining in fiscal 2003. Current projections anticipate a further 7% increase for fiscal 2005.
With those healthy increases in sales tax revenues, perhaps Jared Woodfill can encourage some members of council to be more resistant to the mayor's plans to create new revenue streams at every turn and be more critical of how the city is spending existing revenues.
RELATED: Houston bond rating downgraded (Joe Stinebaker, Chronicle).
Posted by Kevin Whited @ 03/04/05 05:03 PM | Print |
Previous Entry | Home | Next Entry
ADVERTISING
DISCLAIMER
All content © 2004-09, blogHOUSTON and the respective authors.
blogHOUSTON.net is powered by Nucleus.
Site design and Nucleus customization are by Kevin Whited.