Featured Municipal Bond Issue, Week of December 18, 2017: The City of Houston Pension Obligation Bonds – $1 Billion 

This week’s featured bond comes from the State of Texas. The City of Houston is issuing $1 billion in pension obligation bonds the week of December 18, 2017. These pension obligation bonds are being issued as a single series. The purpose of this debt issuance is to use the proceeds to fulfill currently unfunded liabilities of the Houston Municipal Employees Pension System (HMEPS) and the Houston Police Officers Pension System (HPOPS).

Proceeds will be divided by depositing $250 million into HMEPS, and $750 million into HPOPS. Below is a detail of the net pension liability of the HMEPS, HPOPS, and the Houston Firefighters Relief and Retirement Fund (HFRRF). These figures are as of June 30, 2016, before proceeds from the pension obligation bonds are deposited.

Security for the bonds is an annual ad valorem tax levied on all taxable property within the City of Houston, within legal limits. Included in such limitations is the Constitution of the State of Texas, which limits the maximum ad valorem tax rate to $2.50 per $100 of assessed valuation for home rule cities such as Houston. Details on the purposes, tax-status, security, as well as other matters pertaining to these City of Houston pension obligation bonds, which can be found in the preliminary official statement, available on MuniOS.

As of October 2017, the Houston-The Woodlands-Sugar Land, TX Metropolitan Area has an unemployment rate of 4.1%, which is equal to the national rate for October, and 1.1% lower than at the same time in 2016. The chart below (click to expand) shows the Houston metropolitan area, State of Texas, and U.S. unemployment rates for the past ten years. MuniNet provides this data and more, easily accessible, for all 50 states and each Metropolitan Statistical Area in the country, in our Employment Database.City of Houston

City of Houston

Provided at left (click to expand) is a quick snapshot of financial characteristics of the City of Houston as of 06/30/2016, compared with the medians for other U.S. cities, courtesy of Merritt Research Services, LLC. Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness)In addition to the Merritt information related to the featured bond, more information can be found on our municipal bond calendar, city, state, and county pages, and our employment database.

These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.

by Jeffrey L Garceau