Moody's Investors Service said it has downgraded the city of North Las Vegas, Nev., to Ba3 from Ba1.
The rating outlook was revised to negative from stable. This rating action affects approximately $427.9 million of outstanding rated debt secured by the city's general obligation limited tax (GOLT) pledge.
The bonds are secured by the city's full faith and credit pledge, subject to Nevada's statutory and constitutional limitations on overlapping levy rates for ad valorem taxes. Approximately two-thirds of outstanding GOLT debt is additionally secured, and fully supported, by resources of the city's water and sewer enterprises.
The downgrade to Ba3 and negative outlook primarily reflect the city's substantial fiscal pressures over the near term. Importantly, on January 21, 2014 the District Court ruled to strike down the city's declarations of a state of emergency used to balance its budgets in FY2013 and FY2014.
The city used state of emergency powers under statutes to help close budgetary imbalances, substantially by suspending scheduled wage increases and other benefits for public safety employees under collective bargaining agreements.
Significant uncertainty remains over the city's budget condition for the near term as potential back pay and other monetary benefits could be owed to employees over a currently undefined timeline. Further, the city has limited operating flexibility and additional, politically difficult measures are needed to achieve a balanced budget. Nevertheless, the city expects to appeal the District Court's ruling to the State Supreme Court by the end of January 2014.
