City of Houston SustainablePensions

Dear Houstonians,

They said it couldn't be done; but in Houston, we always get it done. Houstonians came together and achieved historic pension reform, lifting a significant barrier to progress in our city. Our victory on pension reform is substantial. We immediately reduced a debt of $8.2 billion and put in place a responsible plan to pay off the balance over 30 years - just like the mortgage on a house. The plan also requires the city to make the payments in full and on time - just like every Houstonian with a mortgage is required to do - and protects the city from cost increases due to economic downturns.

We began 2017 by bringing a deal, negotiated in Houston between the City and employee groups, to the Texas Legislature. The Legislature passed pension reform for the first time in decades, but required voter approval of pension obligation bonds, a critical component of the reforms. In November, Houston voters approved the bonds by a 3-to-1 ratio. We ended 2017 by completing the issuance of those bonds.

We thank our city employees, our state legislators, the Houston business community and, most importantly, the voters of Houston for making this happen. The pension crisis in Houston is no more. We can now move on to what will lift up our families, our neighborhoods and our city!

Sincerely,

Sylvester Turner
Mayor

What the Experts are Saying

The Solution

Real Numbers for a Real Solution

  • For the first time, the pension boards are opening their books. All gains and losses will be recognized.
  • The solution implements a more realistic rate of return of 7 percent, which is in line with national standards.
  • After recognizing all our gains and losses and using a more realistic rate of return, we know that our real unfunded liability is $8.2 billion. Only by using real numbers do we understand the true extent of the problem, and only then are we able to fully address it.
  • The City had borrowed more than $1 billion from pension systems. To pay back the debt, the City has issued pension obligation bonds, which voters passed in November 2017 with more than 75 percent of the vote.

Why It's Called a "National Model"

  • Under the old plan, if investments did not meet expectations, the City had to make up the difference. The solution implements a "cost corridor" so that the City's contributions are capped. If investments perform too far below established levels, the pension boards will cut benefits or increase employee contributions to bring costs in line.
  • Houston's pension systems were in open amortization - we would never pay off the debt. The solution places the systems in closed amortization - we treat the debt like a mortgage, paying it off in 30 years.
  • There are no new taxes needed for the City to meet its obligations. The solution is budget neutral.

Newsroom chevron_right

Houston completes $1B bond sale, cementing pension reforms

The city of Houston completed the sale of $1 billion in voter-approved pension bonds in New York Friday and began delivering the proceeds to its police and municipal pension funds, cementing the pension reform package that has dominated Mayor Sylvester Turner's first two years in office.

Houston Chronicle • 12/27/17

Houston voters approve $1 billion refund to pension fund

It was all smiles all night long as the numbers came in, with voters overwhelmingly backing the slate of initiatives known as "Lift Up Houston."

KTRK • 11/8/17

In Texas, Some Rare Good News About Cities With Pension Woes

"We have to have a fair pension system, both for us and for taxpayers," said Mr. Hunt of the Houston police union.

The New York Times • 6/1/17

Texas Governor signs Dallas, Houston pension bills

Texas Governor Greg Abbott signed into law on Wednesday a bill aimed at addressing public pension problems in the state's two biggest cities, Dallas and Houston.

Reuters • 5/31/17

Videos

Texas House concurs on Senate Bill 2190

Lege TV

The Texas House of Representatives takes its final vote concurring on changes to Senate Bill 2190, the Houston Pension Solution.

Texas Senate passes Senate Bill 2190

Lege TV

The Texas Senate votes to pass Senate Bill 2190, the Houston Pension Solution.

Supporting Documents