Moody’s Investors Service downgraded troubled North Las Vegas, Nev.’s $451 million of limited-tax general obligation bonds to Baa2 from A3 due to the city’s ongoing financial problems.
“The downgrade to Baa2 primarily reflects the city’s substantial fiscal challenges that resulted in the declaration of a state of emergency on June 1,” Moody’s said in a report released Wednesday.
The rating agency kept a negative outlook on the credit, which means another downgrade could come in the near future.
Moody’s said the city’s general fund remains weak and reliant on transfers from its water and sewer enterprises.
The rating agency said North Las Vegas’ large tax base continues to struggle as result of the collapse of the national housing market and an ongoing slow economic recovery.
“Politically difficult measures are needed to achieve balanced operations, including significant expenditure adjustments such as imposing concessions on bargaining units that are subject to potential litigation risk,” Moody’s said.
The city has been battling with its unions to make concessions to help reduce costs amid weak tax revenues.
Nevada state law does not allow a municipality to file for Chapter 9 bankruptcy.
The city has a large amount of debt, though much of it is supported by the city’s water and sewer utilities, according to Moody’s.
North Las Vegas is also facing an audit by the Internal Revenue Service of $105 million of limited-tax building GO bonds issued in June 2006.
The bonds, additionally secured by pledged revenues, were issued for construction purposes, including for a new civic center plaza, according to bond documents.