Tesla, Apple help spur Reno to higher bond ratings
Riding a wave of economic growth spurred by Tesla and Apple, Reno, Nevada was boosted two notches by S&P Global Ratings.
The city’s strong economy and good city management were cited by S&P in raising the rating and underlying rating to A-plus from A-minus on the northern Nevada city’s outstanding limited-tax general obligation bonds. The outlook is stable.
“The rating action reflects our view of the city's maintenance of structural balance and continued replenishment of the city's available fund balances; to a lesser extent, the rating actions also reflect our view of the city's improved management policies and practices,” said S&P Global Ratings credit analyst Benjamin Geare.
Unemployment in the northern Nevada city of 237,893 fell from 14% in 2010 to 4% in January, according to the U.S. Bureau of Labor Statistics.
Tesla and Apple have opened significant industrial operations in Reno and the surrounding area that have added jobs and helped boost the city's tax base, Geare and S&P Analyst Cody Nelson wrote in Wednesday's report.
Healthcare and other industries have also helped to diversify the tax base though tourism and gambling continue to be the dominant economic forces.
In January, Apple opened a new $4 million warehouse in downtown Reno as it announced plans to invest $350 million in the U.S. economy over the next five years. As part of the federal tax bill, companies that move foreign investments back to the U.S. can qualify for a lower corporate tax rate. Apple also committed during a groundbreaking in January to doubling the size of the $1 billion data center east of Reno that was built in 2012.
Tesla opened a lithium battery "gigafactory" in neighboring Sparks in 2016 with a promise to create 6,500 jobs in exchange for $1.3 billion in tax incentives.
“Our improved view of the city's management stems from our assessment of the city's revised debt management and capital improvement policies, as well as our view that the city has successfully emerged from its structural imbalance following the recession,” S&P analysts wrote.
While S&P lauded improvements in long-range budget practices, emphasis on maintaining reserves and efforts to reduce pension liability, analysts said they still view the city’s budget performance as weak and cautioned that budget results could deteriorate from 2017 results in the near term.
The city had slight operating surpluses of 0.8% of expenditures in the general fund and of 1.2% across all governmental funds in fiscal 2017, according to the report.
The stable outlook is based on an expectation that assessed value and retail sales will continue to grow, supporting continuation of the city's budget performance as well as the city's ongoing efforts to recover from the lingering effects of the recent recession, S&P wrote.