Houston, Texas, issued $271.3 million in bonds to make public improvements and refund a previous issuance.
The bonds mature between 2025 and 2043, yielding between 3.58% and 4.44%. They received a rating of Aa3 from Moody’s Investors Service and AA from Fitch Ratings.
The rating “reflects the city’s high financial resilience assessment, moderate long-term liability burden, and somewhat constrained expenditure flexibility,” Fitch analysts wrote.
The issuance comes amid the slow diversification of Houston’s historically energy dependent economy, as a new war in the Middle East casts uncertainty over oil prices. In recent decades, the city’s health care, port, and chemicals sectors have expanded, though oil and gas still takes on outsized import. The energy sector’s direct share of Houston’s economy averaged 7% over the past decade and accounted for 16% of the city’s employment, according to the Federal Reserve Bank of Dallas.
“Adverse conditions in the oil and gas industry and their spillover effects on other industries in the Houston region could adversely affect the Houston region’s economy and City tax revenues,” the official statement accompanying the sale of the bonds reads.
Earlier this month, war erupted in the Middle East after Hamas launched a surprise attack on Israel. The war has threatened to send oil prices soaring, though they have remained stable at around $90 per barrel to this point.
Houston is the biggest city in Texas. The bonds are direct obligations of the city, payable by property tax revenue. Last fiscal year, property taxes generated about half of Houston general fund revenue.
Raymond James & Associates, Inc served as lead underwriter on the issuance, purchasing the bonds for $289.2 million. The price reflected a premium of almost $19 million and a discount of $1 million.