Houston’s credit outlook turns stable after budget changes

Houston got a better credit signal on June 25 when S&P Global Ratings revised the city’s general-obligation outlook to stable from negative and affirmed its AA rating. The move does not erase budget pressure, but it does suggest the city made enough progress for the near term.

That progress came less than three weeks after City Council approved a $7.5 billion budget on June 10, just before the new fiscal year began July 1. The adopted plan includes a new $5 monthly solid-waste fee and a right-of-way charge tied to Houston Water and Wastewater operations, part of a broader effort to close the city’s gap.

What S&P said improved

S&P said Houston narrowed its fiscal 2027 budget gap through structural changes after relying on a larger fund-balance draw in fiscal 2026. The agency said the city reduced an initial $209 million gap to $25 million.

Why residents should still watch the budget

For households, the new trash fee is the most visible change. For the city, the bigger test is whether the budget balance holds through FY2027 without another round of emergency fixes or reserve use. If the plan works, the stable outlook could stick. If not, the improvement may prove temporary.

Houston’s credit picture is better than it was in 2024, when S&P moved the outlook negative after the firefighters’ settlement added financial pressure. For now, the city looks steadier — but not solved.

Sources

• S&P Global Ratings research update on Houston GO debt
• City of Houston Mayor’s Office press release on S&P outlook improvement
• Click2Houston report on Houston City Council’s budget approval
• Houston Chronicle report on Houston’s stable credit outlook