North Las Vegas, Nevada, this week had its long-term issuer default rating upgraded to A-minus from BBB-plus by Fitch Ratings as the city's ratings continue an upward climb after falling to junk a decade ago.
The city of 280,543 had been on the
Fitch in its Tuesday action also retained the positive rating outlook it has assigned North Las Vegas since January 2022 when it was revised from stable.
"It extends the outlook period for another two years; and the indication is that while we are not anticipating, it is quite possible there could be further upgrades in the period," Witte said.
North Las Vegas is benefiting from the strength of city revenues, population growth and sustainable home prices, Fitch analysts said.
The city's population has soared from roughly 200,000 a decade ago, Witte said.
The upgrade "reflects the city's improved financial resilience due to its accumulation of healthy reserve levels, coupled with management's expectation that the city will be able to maintain unrestricted fund balance equal to at least 18% of spending going forward," according to the Fitch report.
Fitch analysts also wrote they expect the city's revenue volatility to decrease over the medium term due partly to more sustainable residential home prices in the city. The city's long-term revenue growth rate has also "increased to above inflation from a historical growth rate roughly in line with inflation as the result of continued robust population and income growth," according to the Fitch report.
"They have posted surpluses for nine straight years, including during the pandemic, because of that their reserves accumulated during that period," Witte said.
The city currently has $166 million in reserve, which is 78% of annual spending, Witte said.
"That is a large amount and it has been building since 2015; and that included the one year, in 2020, they had a 2% revenue decline due to COVID-19 closures," Witte said. "That decline was only 2%, and even that year they had a surplus."
Revenues are up about 11% per year over the past 10 years, which is a high rate of increase, he said.
"The city is still sensitive to what happened during the Great Recession in 2008," Witte said. "They are conservative in their budgeting."
The upgrade affected the city's $127.3 million limited tax general obligation series 2010A water and wastewater improvement bonds that are additionally secured by water and wastewater system pledged revenues.
The LTGO bonds are backed by the full faith and credit of the city, subject to Nevada's constitutional and statutory limitations on the aggregate amount of ad valorem property taxes. The bonds are additionally backed by an irrevocable pledge of, and lien on, 15% of certain consolidated tax revenues, and water/wastewater system net revenues.
"They are budgeting conservatively, and slow to add back staff," said Karen Ribble, a Fitch senior director. "They haven't issued general fund debt in a long time. They are funding with cash."
Fitch hasn't rated new issuance since 2010, Ribble said. The city has issued general obligation debt, but for the water and sewer program, she said.
Tourism and gambling dominate the regional economy with major employers tied to the entertainment, gaming or convention industries, Fitch analysts said. The region's economy is also expanding into the warehousing and other logistics industries, which benefit from the city's location along interstate 15 and its large amount of inexpensive, available land, Fitch analysts said.
The city's unemployment rate spiked at the outset of the COVID-19 pandemic, but declined to 6.3% as of October 2023, Fitch said, which remains significantly higher than the national rate of 3.6% but is the lowest for the city since 2019.
