Budget battle

Moody’s warning should be considered first shot in the coming city fiscal fight.

Winter is coming. Rarely do municipal budgets inspire the sort of dread or excitement that’s made HBO’s “Game of Thrones” such a hit, so perhaps we should all start imagining the city’s fiscal obligations as some undead army advancing on City Hall. Maybe that would finally get people to start paying attention. The threat is here. It is marching forward. And whether or not candidates talk about Houston’s fiscal challenges, the next mayor will have to face it head on.

Budget Director Kelly Dowe has stood on the wall, warning for years that the day would come when the city would have to make some tough choices about how we spend public dollars. Each time, he was able to parry the threat with a bit of one-time finagling. Those budgetary stratagems become harder to pull off as pension obligations grow and debt becomes due, and now Dowe’s bag of tricks is close to running out. There’s no more payments left to defer or cityowned land left to sell.

The enemy is at the gates, and this week Houston witnessed the first skirmish in the approaching budget wars. Moody’s Investors Service, one of the top three credit rating agencies, gave Houston a negative outlook.

That isn’t necessarily bad news. This early warning shot provides key information that the city can use to win in the end. As part of its rating action, Moody’s listed the sort of policies that would improve the city’s standing. Three key issues stand out: Houston’s limited ability to raise revenue, structurally imbalanced pension obligations and a depletion of city reserves.

None of this is particularly new information. Mayor Annise Parker has spent her tenure as mayor trying — and generally failing — to address pension problems.

The real problem is that these three issues can’t be fixed in one step by City Hall. Power over the firefighters’ pension rests with legislators in Austin. The revenue cap is controlled by voters. And past debt arrangements mean that principal payments on city debt are clustered in a short period of time starting around 2017.

City Hall has demonstrated that it can make the tough choices when it does control the levers of power. The unfunded liability on healthcare costs was reduced by nearly $1 billion from 2011 to 2015 when the mayor shifted the balance between what city employees pay and what taxpayers cover, Councilman and Budget and Fiscal Affairs Committee Chair Steve Costello told the Chronicle editorial board. In the same time, unfunded pension liability grew from $2.2 to $3.2 billion.

However, these budget warriors have proven distinctly less successful at convincing other people to make tough choices. For example, Parker and Costello found themselves backing different pension bills in the last legislative session. That’s hardly a successful strategy to get something done in Austin.

The rest of Council has also failed to get on board. Earlier this year, the Ad Hoc Charter Review Committee unanimously decided to keep a vote on the revenue cap off the November ballot. That cap forces the city to give back $50 million in fairly collected tax revenue that could be spent paying down debt, balancing pension obligations, filling potholes or hiring new police officers. Removing the cap isn’t politically popular, but it will likely prove to be financially necessary if the city is going to pay what it owes.

Anyone paying attention knows the steps that Houston needs to take to avoid real harm in the coming budget fight. But a good general has to know more than the right strategy — he has to be able to inspire troops to follow tough orders while avoiding a knife in the back. (That’s the Jon Snow problem, for you “Thrones” fans.)

It isn’t enough to be correct on paper. Houston needs a mayor who can lead.