City of Houston Issues $1.01 Billion in Pension Obligation Bonds; Clears Final Hurdle for Pension Reform
December 22, 2017 -- The City of Houston issued $1.01 billion in pension obligation bonds today, putting in place the final piece of its landmark pension legislation, the 'Houston Pension Solution'.
"Today is an exciting day for the financial future of our city," said Houston City Controller Chris Brown. "With today's issuance, the city upholds its promises to its pension systems and residents, and drastically improves its financial trajectory. Houston residents can rest easier today knowing that meaningful pension reform is finally in place."
The Houston Pension Solution is a plan that reforms the city’s three pension systems, addresses $8.2 billion in outstanding pension liability, and does so in a budget-neutral manner. Houston’s pension reform required significant legislative buy-in – receiving support from Houston City Council, the Texas Legislature, and Houston voters, who overwhelmingly supported the issuance of $1.01 billion in pension obligation bonds in November.
"This plan received widespread support at the Texas Legislature, with City of Houston voters, and now with the investor community," added Controller Brown. "The city's all-in True Interest Cost (TIC) for this issuance came in at 3.965411% - significantly lower than we initially anticipated. This represents significant cost savings, and demonstrates investor confidence in this plan's impact on the City of Houston's bottom line."
The $1.01 billion issuance injects $750 million in liquidity to the Houston Police Officers Pension System (HPOS) and $250 million into the Houston Municipal Employees Pension System (HMEPS). The liquidity shores up the more than $1 billion in deferred payments to the pension systems, and was critical to the systems' buy-in of the city's pension reform plan.
“I again want to thank all stakeholders involved with getting this pension reform plan across the finish line," said Controller Brown. "Another special note of congratulations to Mayor Sylvester Turner - these reforms would not be in place without his leadership."