Houston to Sell $1.1 Billion Bonds for Firefighter Settlement
Houston plans to sell more than $1 billion in bonds to settle a firefighters' pay dispute and the city's chief financial officer is warning it will swell Houston, Texas, plans to sell over $1 billion in bonds to settle a firefighters’ pay dispute, which will increase the annual budget shortfall by up to 75%. The city’s CFO, Chris Hollins, warned that the judgment bonds would require a 25- or 30-year period of annual interest payments to be around $40 million. The debt will expand the city's structural budget shortfall to as much as $280 million a year, from an estimated $160 million to $200 million in the current cycle. Hollins also suggested that city leaders may consider imposing a trash-collection fee on residents, as Houston is the only major city in Texas without such a fee.
Published : a month ago by Joe Carroll in Finance
Houston plans to sell more than $1 billion in bonds to settle a firefighters’ pay dispute and the city’s chief financial officer is warning it will swell the annual budget shortfall by as much as 75%.
The fourth-largest US city will need to sell so-called judgment bonds to cover a settlement that Mayor John Whitmire struck with the firefighters’ union earlier this month, City Controller Chris Hollins told reporters Tuesday.
Over the 25- or 30-year life of that obligation, annual interest payments probably will amount to roughly $40 million, he said. City officials have estimated the interest rate will be around 5.5%, according to documents provided by the mayor’s office.
Meanwhile, the new debt will expand the city’s “structural budget shortfall” to as much as $280 million a year from an estimated $160 million to $200 million in the current cycle, Hollins added.
Houston operates on an annual budget of just over $6 billion. The firefighters’ union and city leaders had been locked in a bitter legal dispute over pay equity for eight years before Whitmire took office in January on a pledge to come to terms.
“We must recognize the financial challenges that lie ahead,” Hollins said. Avoiding a financial squeeze that would force big cuts in city jobs and services means “we have to take a hard look at revenue options.”
Although he stopped short of advocating any specific revenue-raising measures, Hollins said city leaders need to look at imposing a trash-collection fee on residents. As the only major city in the Lone Star State without such a fee, Houston ought to analyze the feasibility of adopting a “solid practice across the state of Texas.”
Previously, he has said the firefighters’ deal “rectifies past grievances and safeguards the city’s financial stability by ensuring budgetary capacity for a new five-year contract with the competitive wages essential for firefighter recruitment and retention.”
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