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Houston to Sell $650 Million Bonds in Firefighter Deal

(Bloomberg) -- Houston plans to sell $650 million in bonds to settle a firefighters’ pay dispute and the city’s chief financial officer is warning it will swell the annual budget shortfall by as much as 75%.

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The fourth-largest US city will need to sell so-called judgment bonds to cover a settlement that Mayor John Whitmire struck with the firefighters’ union earlier this month, City Controller Chris Hollins told reporters Tuesday. Over the 25- or 30-year life of that obligation, interest and other costs will push the total pricetag for taxpayers to more than $1 billion, he added.

Annual interest payments probably will amount to roughly $40 million, Hollins said. Meanwhile, the new debt will expand the city’s “structural budget shortfall” to as much as $280 million a year from an estimated $160 million to $200 million in the current cycle, he added.

The mayor’s office said the “working assumption” is that interest will cost $36 million in the first year and escalate thereafter. “The plan of finance is still under development and will not be finalized until bond pricing,” Whitmire’s office said in an email.

Read More: Houston’s $100 Million Ballot-Box Fight Over Firefighter Raises

Houston operates on an annual budget of just over $6 billion. The firefighters’ union and city leaders had been locked in a bitter legal dispute over pay equity for eight years before Whitmire took office in January on a pledge to come to terms.

“We must recognize the financial challenges that lie ahead,” Hollins said. Avoiding a financial squeeze that would force big cuts in city jobs and services means “we have to take a hard look at revenue options.”

Although he stopped short of advocating any specific revenue-raising measures, Hollins said city leaders need to look at imposing a trash-collection fee on residents. As the only major city in the Lone Star State without such a fee, Houston ought to analyze the feasibility of adopting a “solid practice across the state of Texas.”

Whitmire’s office said that city leaders need to “consider all potential revenue options.”

Previously, Whitmire has said the firefighters’ deal “rectifies past grievances and safeguards the city’s financial stability by ensuring budgetary capacity for a new five-year contract with the competitive wages essential for firefighter recruitment and retention.”

(Corrects dollar amount of planned bond sale in first paragraph of story published March 26; adds mayor’s office comments in fourth and penultimate paragraphs.)

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