Henderson is “cautiously optimistic” about its post-recession financial growth as it prepares to weather the next economic downturn.
The city’s annual finance report, audited by an independent agency and submitted to the city council last week, details a city and region on an upward swing, with steady increases in construction jobs, home prices and building permits over the past few years.
Fiscal year 2015 was the second year in a row the city did not have to rely on reserve funds to finance city operations. The city had used its reserve to balance its general fund, which finances its normal operating expenses, since 2008, said the city’s chief financial officer Richard Derrick.
“We’re cautiously optimistic that we’ll continue to see some growth,” Derrick said.
Derrick talked last week about the city’s finances. Here are some highlights:
Property tax revenues are up, but they could be higher.
Like all cities in the region, Henderson saw significant contraction after the housing crash, which started in 2006. As property prices plummeted, so did property tax revenue — from $85.7 million in 2009 to $58.6 million in 2014. That number grew in 2015 to $61.1 million and is projected to grow in 2016 to $63.6 million, but that’s still nowhere near where it was before the recession.
The challenge for the city is that annual increases in property tax are capped by state law at 3 percent for residential property and 8 percent for commercial property. That means that even though property valuations go up by more than that rate, property taxes can’t follow. Any increase beyond the cap would have to be made by the Legislature.
“Even though those caps are in place, that revenue will eventually come to the city,” Derrick said. “Just because it’s being abated today doesn’t mean it won’t eventually come to us. We might just have to be creative in a way that allows us to wait for that.”
Henderson also has one of the lowest property tax rates in the state, 71 cents per $100 of assessed value, a rate that has not increased in 25 years.
Consolidated tax is almost back to where it was a decade ago, but the city is also feeling more pressure to provide services.
Henderson received $103 million in 2006 in consolidated tax, most of which comes from sales tax. At its lowest during the recession, that dropped to $70.1 million. It crept back up to $94.1 million in 2015. The problem is that even though Henderson is approaching where it was 10 years ago, the city is also a bigger community, Derrick said.
Henderson’s population has increased by about 36,000 since 2006, to almost 288,000 in 2015.
“It was almost a lost decade,” Derrick said. “There are more needs, it costs more, and there’s a lot of pressure to continue to provide the same level of service.”
As a result, the city is continuing to be “creative” in offering services to residents.
The city lost 230 positions — a reduction of 17 percent in the nonsafety workforce — during the recession, but it’s not looking to drastically increase that number anytime soon.
Instead, the city has restructured its departments and outsourced some services, including custodial, trail maintenance and crossing guards. The city also cut services in some of the more non-essential areas, like cutting back hours at swimming pools and recreation centers.
“We’ve been looking for innovative ways in providing our services that’s very efficient in a value-oriented way,” Derrick said.
Now, as the city hires back some of those positions, each department has to come before a critical needs committee to prove why it’s necessary to hire. “What we went through last time was deeper and longer than anyone would’ve thought it would’ve been,” Derrick said. “Going forward, we’re always going to be very careful about hiring.”
To prepare for the next downturn, the city updated its Economic Contraction Management Plan with lessons learned from the recession.
That plan will detail strategies to help the city quickly contract in the event of another sudden economic downturn, like limiting travel, specifying prescribed cuts and slowing down hiring. The city also intends to build up its reserves to give it some buffer room like it did during the recession. Right now, the city’s budget stabilization fund is full, which means the city had a whole month’s reserve in the event of another downturn.
“We really came into the downturn economically reserved,” Derrick said. “We had prepared on the front end so we had time to react and be strategic rather than a knee-jerk reaction.”
Henderson is focusing its efforts on recruiting businesses in the medical, industrial, financial, educational and administrative offices.
One of the main areas it’s looking to for economic development is the city’s Limited Transition Area near Henderson Executive Airport, which the city hopes will become a bustling employment and business center. Derrick said that there’s been some industrial interest in the area, which is encouraging. The city is even looking forward to partnering with other cities and encouraging economic development across the region. Henderson also has its fingers crossed that Nevada lands the electric car startup Faraday Future.
“The key is really working together and how do we increase the value of the area as a whole,” Derrick said.