On Wednesday, Moody’s Investors Services downgraded Houston’s general obligation tax rating to Aa3 – and kept the city’s outlook listed as negative.

The downgrade affects roughly $3 billion in previously issued bonds. Moody’s says the outlook reflects the weakening economy and fiscal performance exacerbated by the drop in oil prices.

The report did offer some insight into the service’s view of newly elected Mayor Sylvester Turner’s handling of the fiscal situation:

“The rating recognizes the positive actions taken by the new Mayor and his plan to engage several stakeholders to modify the city’s fix costs and generate additional revenues, all within the next 18 to 24 months.”

Moody’s went on to say that these signal changes from initiatives passed under Parker’s Administration.

The report pointed to the fixed pension costs that were roughly 31% of the FY2015 budget. Turner’s ability to fix the structural imbalance could lead to an upgrade in the future.

While the report mentions the revenue cap as a reason for the stagnation of the city’s revenue, it’s necessary to understand that Moody’s analyzes the city’s fiscal health – not good governance. If history is an indicator, removing the revenue cap will do anything but ensure that city officials will spend additional revenue efficiently.

Before asking taxpayers for more revenue, city officials need to continue taking the hard steps in limiting the spending of city hall and winnowing down the bloat of local government.

Charles Blain

Charles Blain is the president of Urban Reform and Urban Reform Institute. A native of New Jersey, he is based in Houston and writes on municipal finance and other urban issues.