City Controller Chris Hollins recently expressed his apprehensions regarding Houston’s ability to sustain the proposed settlement with its firefighters in the long term. While he acknowledged that the city could manage the immediate costs of the settlement, he emphasized the need for a revenue increase to prevent a growing structural budget gap.
Hollins estimated that the issuance of $650 million in judgment bonds to cover firefighter back pay and wage hikes over a new five-year contract could amount to as much as $80 million in fiscal 2025. This poses a significant challenge considering Houston’s existing structural budget deficit of $160 million to $200 million. The city’s projected $400 million fund balance would suffice for the near term, but the long-term financial implications are a cause for concern.
Annual debt service on the judgment bonds is expected to be around $40 million, with a total debt payment of up to $1.3 billion including interest costs over a 25-30 year period. Additionally, firefighter wage hikes, estimated at $36 million in fiscal 2025, could escalate to over $140 million in the final year of the contract. With upcoming contract negotiations with other city workers and an expiring police contract, Houston faces further financial strain.
The settlement with the Houston Professional Fire Fighters Association, while aimed at resolving a prolonged impasse, is contingent upon approvals from various entities including the Texas Attorney General, Harris County District Court, and the Houston City Council. Failure to secure these approvals and the city controller’s certification could have negative repercussions on Houston’s credit ratings, which currently stand at AA from S&P Global Ratings and Aa3 from Moody’s Ratings.
Houston’s financial sustainability is at stake with the proposed settlement with firefighters. While the city may be able to manage the immediate costs, the long-term implications and the need for a revenue boost are critical considerations. It is imperative for city officials to carefully evaluate revenue options and address the structural budget deficit to avoid further financial challenges in the future.