Summary: Houston, Texas; General Obligation

Standard&Poor's Ratings Services lowered its rating on the City of Houston, Texas' existing general obligation (GO) debt by one notch to 'AA' from 'AA+'. The outlook is negative. The downgrade reflects our opinion of the city's large unfunded pension liability that has been exacerbated by what we consider optimistic rate of return assumptions and a history of lower-than-actuarially determined contributions, which the current administration is seeking to correct. The impact that growing pension costs have on Houston's budgetary flexibility are magnified by charter limitations on revenue increases and more recently, the impact of low oil prices on local tax revenues. The negative outlook reflects our view that there is at least a one-in-three probability that we could lower

...Standard & Poor's Ratings Services lowered its rating on the City of Houston, Texas' existing general obligation (GO) debt by one notch to '##' from '##+'. The outlook is negative. The downgrade reflects our opinion of the city's large unfunded pension liability that has been exacerbated by what we consider optimistic rate of return assumptions and a history of lower-than-actuarially determined contributions, which the current administration is seeking to correct. The impact that growing pension costs have on Houston's budgetary flexibility are magnified by charter limitations on revenue increases and more recently, the impact of low oil prices on local tax revenues. The negative outlook reflects our view that there is at least a one-in-three probability that we could lower the rating again within the next two years if Houston is unable to develop and implement a credible plan that lowers its unfunded pension liability or if continued softness in oil prices leads to ongoing contractions...

Summary