Standard & Poor’s lowered its rating on Henderson’s general obligation debt one notch to AA from AA-plus and assigned a negative outlook.
Analysts said the city’s structural budgetary imbalance led to the rating downgrade.
The city’s budget problems are a result of reductions in tax revenue from property tax declines and the area’s prolonged economic weakness, according to the report.
Taxable values fell 50% over the past three years as real estate values plummeted, resulting in operating deficits and reduced general fund reserves and liquidity, the report stated.
Henderson is starting to show signs of stabilization, but more economic strain could result in downward pressure on the rating, analysts said.
“It is our opinion that the city’s proactive management team will likely continue to make the necessary budgetary adjustments to balance the operating budget while preserving, in our view, strong general fund and financial stabilization fund reserves,” said S&P analyst Daniel Zuccarello. “To the extent management is successful, we could view this as a stabilizing credit factor.”
Henderson, part of the Las Vegas metro region, is the second largest city in Nevada after Las Vegas, and has an estimated population of 257,729.