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Houston controller flags fiscal pressure after firefighter bond deal; projects FY24 fund balance and warns on credit outlook
Summary
City Controller Chris Hollins told the Budget & Fiscal Affairs Committee the general fund is projected to end FY24 with a $483.4 million balance but noted risks from a new firefighter financing and a recent S&P negative outlook. He outlined drivers of revenue and expenditure shifts and recommended tighter controls on debt and cash management.
City Controller Chris Hollins told the Budget & Fiscal Affairs Committee on July 30 that the citys general fund is projected to end fiscal year 2024 with an approximate $483,400,000 balance but that recent financing decisions and revenue uncertainties pose near-term risks. "Our revenue projection increased by $7,400,000 from the May 2024 monthly financial report," Hollins said, identifying higher industrial assessments, more licences and permits and stronger interest income as drivers.
Hollins reviewed enterprise-fund shifts and investment holdings, saying the citys general investment pool totaled about $5.74 billion as of June 30 and that Fitch had assigned the pool an AAA rating. He also described two active swap positions and reported a net paid amount of $14,600,000 for the 12-month fiscal year ending 06/30/2024; the combined fair value for the swaps was negative $69,500,000, an improvement of roughly $16.8 million from the prior quarter.
Why it matters: Hollins said the city sold $734,000,000 in general-obligation refunding bonds this quarter, and about $650,000,000 of the proceeds are being used to compensate firefighters under a council-approved agreement. He warned that markets are taking notice. "Earlier this month, Standard and Poor's revised its rating outlook for the city's general obligation debt from stable to negative," Hollins said, adding that the outlook reflects concerns about reserve drawdown, anticipated budget shortfalls tied to increased debt service and salary commitments, and "no articulated plan to raise revenue." Hollins said S&P described at least a one-in-three chance of a downgrade if those issues persist.
Hollins also summarized fund-specific movements: the combined utility system fund showed a projected $77.2 million decrease in operating revenues tied to a new water-bill improvement plan while operating expenditures fell by $111.1 million because of contract delays and personnel and supply savings. The aviation operating fund saw an $8.0 million rise in operating revenues and an $8.8 million rise in operating expenses. He said nonoperating interest income increased across funds.
Councillors asked follow-up questions about the interest rate on the refunding bonds (staff referenced a rate in the mid-4 percent range) and about storm-response funding; finance staff said $23,000,000 was transferred from the budget stabilization fund earlier in July and provided preliminary estimates for recent storm-related costs.
Hollins used the presentation to note personnel changes and community events. He paid tribute to departing Fire Chief Sam Pena, welcomed Thomas Munoz to lead the Houston Fire Department and expressed condolences on the passing of Congresswoman Sheila Jackson Lee.
What comes next: Hollins offered several operational suggestions, including possible transfer of debt-service administration into the controllers office to centralize payment monitoring. He concluded by inviting councillors to contact his office for details and said staff will return with follow-ups requested during the hearing.
