Moody's hands Houston negative debt outlook, cites pension costs

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."

Mayor Annise Parker reacted to the news Sunday, issuing a news release that largely concurred with the agency's warnings about rising pensions costs and the voter-approved revenue cap, which ties property tax collection to the combined rates of inflation and population growth. The city ran into the cap for the first time last year, triggering a modest property tax rate trim.

Without the cap, the city would have had another $53 million to spend this year.

"Until the Legislature acts, pension payments will continue to crowd out many of the other needs of the City," Parker said in the release. "And our cap on ad valorem revenue means we struggle to meet the demands of our rapidly growing population."

Parker's attempts at pension reform have failed to gain traction in Austin. A City Council committee earlier this year signaled it was unlikely to approve placing the revenue cap before voters for alterations.