The City of Houston reportedly recently completed its sale of more than $1 billion in pension obligation bonds, part of a pension reform agreement Houston Mayor Sylvester Turner reached with the leaders of the police and city workers’ unions.
Approved by Houstonians during the last election in November, $2.8 billion of future pension benefits as a means to reduce the $8.2 billion in unfunded liabilities will be reduced.
“With today’s issuance, the city upholds its promises to its pension systems and residents, and drastically improves its financial trajectory,” Houston City Controller Chris Brown said in an interview with the Houston Chronicle. “Houston residents can rest easier today knowing that meaningful pension reform is finally in place.”
Out of the $1.01 billion in bonds, $750 million will go to the Houston Police Officers Pension System (HPOS), and the remainder will go into the Houston Municipal Employees Pension System (HMEPS).
If voters ultimately chose to reject the measure, financial experts said the the agreement between the mayor and the unions would be put in a position to fail, presenting leaders with potential a shortfall in pension funds.
Administrators initially delayed the rollout of the bond issue due to a lawsuit filed by former city housing director James Noteware. Noteware, which claimed the language on the ballot to be “materially misleading” and possibly allow the city to sidestep a limit on city-imposed property taxes voters also approved in 2004.
The bonds will reportedly be split into 16 tranches, with interest rates ranging from 2.2 percent to 4.1 percent.
According to Brown, the city’s overall interest rate ultimately came in just under 3.97 percent, which he said “represents significant cost savings, and demonstrates investor confidence in this plan’s impact on the city of Houston’s bottom line.”