HOUSTON, Texas (KTRK) — A financial group has sent a warning shot to the city of Houston, saying its administrators could face serious consequences if changes aren’t made.
Houston attracts a lot of attention for several reasons, including culture, food, and sports. But Administrator Chris Hollins told council this week there’s another reason some people are paying attention.
“Houston needs a plan to return to fiscal sustainability,” Hollins said. “Continued inaction poses real risks to our nation’s future prosperity, and this is a real challenge knocking on our door. All eyes will be on Houston to see how we respond to this call. ”
Hollins said the city received a warning from credit reporting agencies. S&P Global Ratings downgraded the city’s credit outlook from stable to negative.
The city’s credit rating has not been downgraded, but there is a one in three chance of it being downgraded. That would make the city’s borrowing costs even higher.
“That means less money going to other essential services like police, fire, parks and public health,” Hollins explained.
Financial groups are concerned that the city is not receiving enough funding and is heavily in debt. One example they point to is a recent $650 million firefighter contract.
The mayor’s office announced that the fund balance has returned to pre-pandemic levels. But the best-case scenario for the city’s budget would be a $52 million surplus by 2027, according to credit reports. In the worst case scenario, it would face a deficit of $515 million.
The financial group added that the city has no plans to increase revenue. That may change soon.
City Council members are expected to consider raising property taxes next week. Normally there is an upper limit, but recent natural disasters have allowed an increase.
“Neither the mayor nor the council members have talked to me about their plans for tax rates,” Hollins said. “Let’s see what decision we make.”
ABC13 contacted Mayor John Whitmire’s office and was told he doesn’t want to raise taxes and is focused on cutting costs.
The city paid an outside contractor to prepare a report investigating the matter.
Another idea the city council is considering is charging for trash. Hollins said the situation could be dire if nothing changes.
“It means massive layoffs and it means a decline in city services,” Hollins explained. “If we’re already frustrated with trash being picked up on time, what happens when hundreds of solid waste employees are laid off?”
Many are looking to Houston to see how its leaders will handle finances.
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