The financial struggles of North Las Vegas have not gone unnoticed on Wall Street, where one company downgraded certain city debt on Friday.
Fitch Ratings downgraded its rating on city debt including $136.57 million in limited tax general obligation (LTGO) bonds and $298.6 million in outstanding LTGO, water and wastewater project bonds.
The ratings for both were moved from "A" to "BBB" and the debt was put on "rating watch" status — meaning Fitch will be keeping an eye on the city’s financial performance to see if additional rating changes are necessary.
Credit ratings, while not affecting city finances immediately, are important because they help determine interest rates in future financing and refinancing deals.
"The downgrade reflects the city's severe fiscal distress driven by a steep drop in revenue coupled with long-term labor contracts with large increases in annual costs. The city plans to close one-third of its fiscal 2013 $33 million budget gap by declaring a state of emergency for one year and suspending public safety labor contracts,'' Fitch said in a statement.
Fitch noted the city has suffered from a stressed housing market marked by high foreclosures and that the regional economy has sustained job losses in tourism, gaming and construction.
The new "BBB" rating for the debt, according to Fitch criteria, is one step above speculative or "junk" territory.
Even with its financial struggles, a "BBB" rating suggests "good credit quality."
That's opposed to the "high credit quality" associated with an "A" rating.
Friday’s action follows a similar downgrade of certain North Las Vegas debt by Moody’s Investors Service in March.