Houston's credit outlook lowered to negative amid looming property tax decisions

HOUSTON, Texas (KTRK) -- Financial groups sent warning shots to the city of Houston, and its controller said that if changes aren't made, there could be severe consequences.

Houston gets a lot of attention for several reasons, including its culture, food, and sports. However, Controller Chris Hollins told the council this week that there's another reason why some are looking.

"Houston needs a plan to return to fiscal sustainability," Hollins said. "Continued inaction poses real risks to our future prosperity, and this is a real challenge that's knocking on our door. All eyes are on Houston to see how we answer the call."

Hollins said the city received wake-up calls from credit agencies. S&P Global Rating lowered the city's credit outlook from stable to negative.

The city's credit hasn't been downgraded, but there's a one-in-three chance it will. If that happens, it will cost the city more to borrow money.

"That means less money to go into other critical services like police, fire, parks, and public health," Hollins explained.

Financial groups are worried the city is not receiving enough money and is taking on too much debt. One example they point to is the recent $650 million firefighter contract.

The mayor's office says the fund balance has returned to pre-pandemic levels. However, a credit report shows the city's budget's best-case scenario is a $52 million surplus by 2027. In the worst case, it faces a $515 million deficit.

Financial groups add the city doesn't have plans to increase revenue. That could soon change.

Councilors will consider raising property taxes next week. Normally, they're capped, but recent natural disasters have allowed them to increase.

"Neither the mayor nor any member of city council talked to me about their plans for the tax rate," Hollins said. "We'll see what decision we make."

ABC13 contacted Mayor John Whitmire's office and was told he does not want to increase taxes and is focused on ways to cut costs.

The city paid for an outside contractor, who's working on a report looking into this.

Another idea the council is considering is a garbage fee. Hollins said if nothing changes, it could be dire.

"That means massive layoffs, and it means a decline in city services," Hollins explained. "If you're already complaining about your trash getting picked up on time, what's going to happen when hundreds of solid waste employees get laid off.?"

Many are looking at Houston to see how its leaders address its finances.

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