North Las Vegas, Nevada, received a two-notch bump from Fitch Ratings Wednesday to BBB-plus from BBB-minus furthering the city’s upward ratings trend that began in 2018.
Fitch also revised the outlook to positive from stable.
The city of 200,000 had been on the fiscal comeback trail pre-pandemic after seeing its ratings fall to junk in 2014 as it fought off insolvency.
The Fitch rating change affects the city’s long-term issuer default rating and $135.1 million of Series 2010A long-term general obligation water and wastewater improvement bonds, additionally secured by water and wastewater system pledged revenues.
The upgrade “reflects the city’s improved inherent budget flexibility through greater spending flexibility and greater independent ability to raise revenues, as well as available fund balances well above post Great Recession lows,” Fitch analysts wrote.
Fitch upgraded the ratings to BBB-minus from BB in January 2020, restoring them to investment grade. Moody’s Investors Service upgraded the city’s bonds to A1 from A2 in February. S&P Global Ratings returned the city’s ratings to investment grade with an upgrade to BBB from BB-plus in April 2018.
The bonds were rated B, Ba3, and BB-minus by Fitch, Moody’s and S&P, respectively, in 2014.
The city of 200,000 had been facing fiscal challenges for several years by the time it reached its low point ratings-wise in 2014. The downgrades came as the city struggled to make bond payments.
In 2014, the situation was so dire that there was even talk of disincorporation. State law bars Nevada municipalities from filing for bankruptcy, which means the state would have become the receiver if the city had been unable to close its budget gap and successfully negotiate a settlement with its employee unions for back pay.
Redevelopment of a large industrial tract, some belt-tightening and the area’s real estate recovery helped restore the city’s financial position.
Prior to the pandemic, “revenue growth had been accelerating as the city emerged from the lingering effects of the Great Recession; however, Fitch expects revenue to grow slowly over time when volatility is factored in,” Fitch analysts wrote. “The city performed well throughout the pandemic-induced recession owing in part to the strong federal stimulus response, which helped support the economy despite high unemployment and limited capacity at casinos through May 2021.”
The positive outlook reflects Fitch’s expectation of positive fiscal trends as the economic effects of the pandemic subside and the city continues to address past spending deferrals and build financial resilience.
The city, a suburb of Las Vegas, like its larger neighbor to the south is dependent on tourism and gaming. But gambling revenues have hit a hot streak, with the Gaming Control Board saying in December that 2021 could be the state’s best year since before the 2008 recession.