Fitch says implementing the amendment to the City Charter that was approved through Proposition B “will exacerbate an already challenged budgetary profile.”

Credit rating agency Fitch has changed the City of Houston’s outlook from stable to negative after the passage of Proposition B in the November 6 midterm election. Proposition B establishes pay parity between the local police and fire departments.

A Fitch report released this week says that the implementation of the pay parity “will exacerbate an already challenged budgetary profile.”

Fitch notes that the City of Houston has shown “an ability and willingness to adjust spending levels to counter revenue limitations and periods of revenue weakness and to maintain sound reserves,” while adding that such expenditure flexibility “will be tested over the near term given the combination of the new charter amendment,” in reference to Proposition B.

The credit agency also mentions increased pension-related spending and existing budgetary pressures as factors to take into account. Moreover, the report touches on the revenue cap voters approved in 2004.

“Fitch believes further cost cutting will be necessary over the near term given the current imbalance between ongoing revenues and expenditures, the city’s limited revenue-raising ability, and increased public safety and pension-related spending,” the report notes, although it adds that “Houston’s overall long-term economic outlook continues to be positive.”

Mayor Turner’s reaction

Mayor Sylvester Turner said the change in the City’s outlook from stable to negative “should concern every citizen who wrongly believed Proposition B would have no impact on the city's ability to balance the budget and pay its expenses.”

Turner underscored that pay parity between police and fire will force the city to increase firefighter pay by 29 percent at a minimum cost of $100 million annually without giving the city additional revenue to pay for it.

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