Two-notch upgrade boosts North Las Vegas ahead of refunding

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North Las Vegas has been on a comeback for several years and its ratings are starting to reflect it.

The Nevada city received a two-notch upgrade from Moody's Investors Service to Baa1 Monday ahead of a general obligation bond sale. It assigns a positive outlook at the higher rating.

The Las Vegas suburb's ratings fell below investment grade in 2013 as the city struggled, but the redevelopment of an industrial park, the long recovery and some belt tightening have helped city officials right the ship.

Moody’s says it has upgraded the city five notches from the speculative-grade rating of Ba3 since January 2014.

The rating agencies sent the city's bonds to junk after it declared its second state of emergency in 2013.

Fitch Ratings still has North Las Vegas at a speculative-grade BB following an upgrade from B-plus in February.

S&P Global Ratings returned North Las Vegas to investment grade in April with an upgrade to BBB from BB-plus, assigning a stable outlook.

The city battled fiscal challenges for several years. Talk of the state taking over the city of 222,000 began in 2011 after record home foreclosures reversed the once bustling city's fortunes.

Redevelopment of a large industrial tract, some belt tightening and area's real-estate recovery helped restore the city's financial position.

Moody’s analysts said they upgraded the city because of continued improvement in its finances that is driven by revenue growth supported by the expanding Las Vegas-area economy, and the city's strong new development amid a growing population, according to the report.

The new Baa1 rating applies to both the forthcoming GO limited tax building refunding bonds series 2018, and the city's outstanding GOLT backed obligations, affecting approximately $303.5 million of outstanding rated debt, post-refunding.

The positive outlook also indicates the possibility of another upgrade in the next year or two, Moody's analysts wrote. It also "anticipates that management will continue to control expenditure growth amid strong revenue growth, and that the budget will be consistently balanced on a city-wide basis each year," analysts wrote.

“While the city's net direct debt burden is low, its net pension liabilities are high although its fixed costs burden is manageable,” according to analysts. "At the same time, the city has limited expenditure flexibility given the service needs of its growing population and still low staff levels following deep cuts in the last recession."

Preliminary bond documents have yet to be posted on the Municipal Securities Rulemaking Board's EMMA website.

The refunding bonds are anticipated to be issued in October in an amount not-to-exceed $110 million, according to a staff report prepared for the city council.

"We expect that positive tax base and economic trends will continue in-line with the greater Las Vegas metro area," Moody's analysts wrote. "Also, the water and sewer utilities remain healthy including solid liquidity despite subsidizing general city operations, and they fully fund debt service for most of the city's GOLT bonds which were issued for related infrastructure projects."

The city's fiscal recovery has not included its once ambitious goal of becoming an electric vehicle manufacturing hub.

The firm Faraday announced plans in 2016 to build a $1 billion electric car plant at the city's Apex Industrial Park, but those plans never materialized.

While Faraday still owns the land, no plans have been settled for future developments, John Schilling, Faraday’s director of public relations, told the Las Vegas Review Journal in June. Faraday is now trying to launch manufacturing at a former tire factory in Hanford, California.

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Ratings Primary bond market Nevada