HOUSTON -- Borrowing helped keep Houston healthy during the 1980s oil bust -- and now that good times are back, city officials have no intention of stopping.

Four years into a strong recovery, officials have put forward a record $3.1 billion capital plan for the next five fiscal years that includes a critical $500 million general obligation bond authorization. Voters will consider the GO proposal on Nov. 5.

Mayor Kathy Whitmire said Houston kept issuing debt during the hard times because of its critical infrastructure needs and a desire to reassure Wall Street.

"It sent a signal that Houston intended to come back," said the fifth-term mayor. "We also had a lot of catching up to do. I wouldn't say we are caught up now . . . but without [investment] our recovery would have been much more difficult."

City Controller George Greanias said, "There was never a recession in terms of our capital program, and I think it has already started to serve the city well."

Houston did invest in a major way during the 1980s. All told, the double-A rated city went to the bond market 35 times to borrow or refinance $3.2 billion, according to Securities Data Co./Bond Buyer.

The nation's fourth-largest city built a world-class convetion center, revamped its airport system, and spent millions on other projects that analysts and advisers agree helped spur the economy.

"The combination of the city, Harris County, and the Houston Independent School District issuing a lot of debt helped keep jobs in the community that were important during the downturn," said Tom Masterson, chairman of Masterson Moreland Sauer Whisman Inc. and the city's financial adviser for much of the past 25 years. "It was a factor in bringing some stability here."

When the world oil market collapsed in 1982. Houston -- the nation's energy capital--was devastated. Just as the city launched its first capital plan, the downturn began claiming casualties: thousands of high-paying jobs, the tax base, and the city's triple-A rating.

But by January 1987, things began to change. Since then, Houston has added 260,000 jobs--many of them white-collar.

"It's now back bigger in terms of population and employment," said Bill Gilmer, a senior economist in the Houston office of the Federal Reserve Bank of Dallas. "Houston is still the energy capital of the nation, but it has diversified."

Home to the National Aeronautics and Space Administration, Houston has become a scientific center and seen medical research become a growth area. The city also has diversified its oil industry so it is not as dependent on price-sensitive oil exploration.

While Dallas to the north remains the financial center of the Southwest, Houston is at the nexus of international commerce. With 40 foreign banks and scores of multinational firms, the city stands to benefit greatly from the proposed U.S.-Mexico free trade agreement.

"Houston works on the world stage. People get on a plane here and go to the Congo looking for oil," Mr. Gilmer said. "The economy is still susceptible to oil prices and fluctuations in the value of the dollar, but it can feel a recession just like the rest of Texas."

While the city prospers, much of the state lags.

"It's been on the cutting edge of the recovery in Texas," said Peter D'Erchia, senior vice president at Standard & Poor's Corp. "They managed their way through that period satisfactorily. They had so many things that were not under their control."

Analysts say now the city must manage its already heavy debt levels in the future. Houston has $3.4 billion of gross direct debt outstanding, including $1.08 billion of GO bonds, according to Moody's Investors Service.

The agency reported that debt service accounted for 19.4% of all expenditures in fiscal 1990. But like other Texas cities, Houston retires about 71.9% of its debt within 10 years -- trend expected to continue.

"They have very rapid retirement of debt," said Christ Evangel, assistant vice president at Moody's. "They expect to retire about $440 million [of GO debt] in the next five years."

That will be almost as much as they plan to issue by fiscal 1986. Of the proposed $3.1 billion program, the largest share will include $1.3 billion for water and sewer projects and about $608 million in GO bonding for mostly street and traffic control projects.

"I think the current contemplated level of debt is reasonable," Mr. Greanias said. "Part of this relies on the continued growth of the economy. If the economy is growing at X, you should not be spending at X plus Y."

If projections are accurate, the recovery in Houston should continue at least through the mid-1990s. After two consecutive years of growth in the city tax base, officials are expecting the assessed valuation to hit its pre-oil-bust peak of $69 billion in fiscal 1984.

Meanwhile, triple-A rated Dallas and other Texas cities continue to see property values slide, despite earlier predictions of a rebound in the tax base.

Beyond growth in the economy, Ms. Whitmire expects the 1.6 million population of the city to increase -- which will continue to spur the demand for more capital funding. She said the city could have 2 million residents by early in the next century.

"We've got a ways to go before we knock off Chicago," she said of the nation's third-largest city. "We are not knocking at the door yet."

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