S&P Global Ratings downgraded the bond rating for La Marque six notches to the non-investment grade level of BB-plus from A-plus, citing the Texas city's "extremely rapid" financial deterioration.
The move announced on Monday followed a one-notch
The latest downgrade by S&P, which rates about $21 million of the city's outstanding limited tax general obligation bonds and tax and revenue certificates of obligation, "reflects our view of weak management conditions following significant turnover in key executive positions and the subsequent rapid pace of deteriorating reserves with ongoing structural imbalance and liquidity issues that will reduce reserves to negative levels in fiscal 2025," the rating agency said in a report.
S&P ended a CreditWatch review launched Sept. 18, while assigning the BB-plus rating a negative outlook with a warning "there is a one-in-three chance that we could lower the rating during the one-year outlook horizon if management fails to establish a track record of balanced general fund performance."
At Monday's city council meeting, Mayor Keith Bell said the downgrade "isn't unexpected."
"This is a consequence for what has happened over the past two years plain and simple," he said.
La Marque has taken steps to stabilize its finances, including reducing fiscal 2026 spending by about $900,000 and approving a higher maintenance and operations property tax rate expected to raise about $340,000.
Those moves were aimed at rebuilding the city's reserves and cover fees and interest costs related to a potential $4.3 million cash flow borrowing. La Marque Finance Director Worth Ferguson said Tuesday the city still intends to pursue a note sale this fall and "is committed to fiscal responsibility, strategic planning, and increased oversight."
Texas Attorney General Ken Paxton called recent tax hikes by
La Marque, which filed its
S&P said the question of the tax hike's legality is among near-term challenges to achieving fiscal balance, along with the city's elevated exposure to physical risks and recent cash-flow shortfalls that reduced its financial flexibility.
"Somewhat offsetting the weakened credit fundamentals is the city's appointment of a new management team that has prioritized and implemented a fiscal stabilization plan, which we will monitor for evidence of effectiveness in restoring budget stability, reserves, and liquidity," it said.
The city's Moody's rating, which was cut to A3 from A1, remains under review for a potential further downgrade.
