LOS ANGELES — Fitch Ratings maintained a junk rating and negative outlook on $422 million in North Las Vegas, Nev. bonds based on a tentative budget and indications that a state takeover appears unlikely in the near term.
The city's severe financial challenges continue, Fitch said April 30, even though the city's release of its tentative fiscal 2015 budget to the state defers receivership. The tentative budget had to be presented to the state by April 15 to avoid takeover.
"The budget utilizes a mix of expenditure reductions and deferrals in addition to further drawdowns of reserves," according to the Fitch report.
Fitch rates the city's limited tax general obligation bonds B. The bonds are rated Ba3 and BB-minus by Moody's Investors Service and Standard & Poor's.
As a bright spot, Fitch noted tentative settlement agreements reached April 10 with all four city unions totaling $7.7 million.
Nevada District Court Judge Susan Johnson had ruled against the city on Jan. 21 in a $25 million lawsuit brought by the unions. Moody's analyst Patrick Liberatore also said in mid-April that settling for $7.7 million, which is 31 cents on the dollar, is a much smaller burden and alleviates some of the budgetary pressure on the city.
The council is scheduled to consider the union settlement May 7, vote on the budget May 20, and submit a final budget to the state June 2.
Moody's deemed state intervention less likely in the near term if union members accept the city's discounted settlements.
Even without state receivership in its immediate future, the city that experienced a 52% reduction in taxable assessed valuation over the last four years still faces an uphill battle, according to the Fitch report.
The city's debt is high relative to the tax base, amortization is slow and debt service is inclining in the intermediate term, Fitch analysts said.