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Economic growth

Moody's Assigns Aa3 Rating to Hendersonville, NC and Water and Sewer Enterprise

Strategic Insights

— 2 min read

Moody's Investors Service has issued an Aa3 issuer rating to the City of Hendersonville, NC, and an Aa3 rating to the Hendersonville Water and Sewer Enterprise's estimated $10.1 million Water and Sewer System Revenue Bonds, Series 2025. The city's economy is driven by ongoing tax base and population growth, with drivers including industrial development across the Asheville metropolitan area, tourism, and a growing population of retirees. The city's sound financial position is reflected by available fund balances of 34% of revenue in FY 2024, with balanced operations expected for 2025. The water and sewer enterprise's strong debt service coverage and liquidity will offset an increase in its debt to operating revenues ratio, which will likely exceed 4x by FY 2030.

Key Takeaways:

  • Hendersonville's economy is driven by ongoing tax base and population growth, with industrial development, tourism, and a growing population of retirees as key drivers.
  • The city has a sound financial position, with available fund balances of 34% of revenue in FY 2024, and balanced operations expected for 2025.
  • The Hendersonville Water and Sewer Enterprise has a strong debt service coverage of over 2.00x for its senior lien bonds, and a strong record of rate increases that will continue to drive growth in its liquidity.
  • The city's long-term liabilities are elevated relative to peers, at approximately 250% of revenue, mainly driven by debt issued for the water and sewer enterprise.
  • The city benefits from strong budget management, transparency, and disclosure practices, as well as comprehensive and robust capital planning for its water and wastewater enterprise.
  • Factors that could lead to an upgrade of the ratings include a reduction in long-term liabilities to under 200% of revenue, sustained increase in available fund balances and liquidity, and a decline in the debt to operating revenues ratio.

Statistics:

  • The city has a population of 15,253 residents (2023 American Community Survey).
  • The water and sewer enterprise serves 31,190 active water accounts and 10,622 active sewer accounts as of 2024.
  • The city will have approximately $118.8 million in total debt outstanding following the issuance, including $81.2 million of water and sewer enterprise debt.
  • The water and sewer enterprise's debt to operating revenues ratio will likely exceed 4x by FY 2030.
  • The city benefits from a 34% available fund balance policy in FY 2024.

Sources:

  • Moody's Ratings (Moody's) - issuer rating to the City of Hendersonville, NC, and Aa3 rating to the Hendersonville Water and Sewer Enterprise's estimated $10.1 million Water and Sewer System Revenue Bonds, Series 2025.
  • US Cities and Counties published in July 2024 and available at https://ratings.moodys.com/rmc-documents/425429.
  • US Municipal Utility Revenue Debt published in March 2024 and available at https://ratings.moodys.com/rmc-documents/416489.

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