North Las Vegas restored to across-the-board investment grade ratings
Economic growth has taken a firm hold in North Las Vegas, Nevada, leading Fitch Ratings to upgrade the suburb's rating an investment grade BBB-minus.
Fitch follows Moody's Investors Service and S&P Global, both of which had restored the city's ratings to investment grade by April 2018.
The rating was upgraded to BBB-minus from a junk BB rating Thursday affecting $166 million in general obligation bonds. Fitch's outlook was revised to stable from positive at the new higher rating.
"This jump in ratings independently affirms the city's highly successful economic development efforts, sound management practices and ongoing commitment to efficiencies," said Delen Goldberg, assistant city manager. "There is more work to be done, but the confidence of Wall Street and surging interest from investors is a clear indication that what we are doing to transform North Las Vegas into an economic powerhouse is working."
Hit hard when housing values tanked during the 2008 recession, the city saw its ratings fall below investment grade in 2013 as it declared a state of emergency and the state contemplated a takeover.
Since then, the comeback kid has experienced strong economic growth driven by the redevelopment of an industrial park, the long recovery and some belt tightening.
Among the strengths cited by Fitch are that its population has more than doubled since 2000 to 246,000. It also has large tracts of undeveloped land and is only about 43% built out, according to Fitch.
“Revenue growth has been strong over the past five years and future growth is expected to at least track inflation,” Fitch analysts wrote.
The city experienced an aggregate loss of 58% of taxable assessed valuation following the housing market collapse during the Great Recession of 2008. While assessed valuation has largely recovered, Fitch said it remains at about 90% of the peak it hit in 2009.
Though the revenue framework is still somewhat weak with a limited ability to raise revenues, Fitch analysts said the “city exhibits improved, although still limited, spending flexibility, and improved gap closing ability after five years of consecutive additions to fund balance.”
“Long-term economic growth prospects appear solid, but given the vast amount of developable land in the region, the regional economy and city revenues remain vulnerable to above average volatility,” Fitch said.
Tourism and gambling dominate the regional economy, but Fitch said it is also expanding into warehousing and other logistics industries.
The city received an upgrade to A2 from Baa1 from Moody’s Investors Service in June ahead of the city’s plans to refund $65 million in wastewater reclamation system refunding bonds. Moody’s also revised the outlook from to stable from positive after the upgrade.
Moody’s cited strong revenue growth supported by the expanding Las Vegas area economy, and the city's healthy new development amid a growing population. It also cautioned that while direct debt burden is low, the city has high pension liabilities.
Moody's has upgraded the city several notches from the speculative-grade rating of Ba3 since January 2014.
S&P Global Ratings upgraded in June the city’s general obligation bond rating to A from BBB, a three-notch bump. The outlook is stable.