An independent analysis of North Las Vegas’ finances resulted in a two-spot increase in its credit rating, paving the way for the city to potentially collect millions in annual investments and tax cuts, city officials said.
Standard & Poor’s annual review resulted in the rating being boosted from a BB+ to BBB, the latter of which is considered “investment-grade” quality. The improvement will allow the city to refinance almost $400 million in long-term debt at a lower interest rate, while cutting about $2 million to $4 million in taxes, said Cori Knauss, the city’s director of finance.
“It’s significant to have independent affirmation of the city’s credit,” Knauss said. “And great news for North Las Vegas.”
The rating represents a vast improvement from the years of the housing crisis and recession; in 2009 the city saw its bonds hit “junk,” or high-risk status not recommended for investors because of the city’s low credit quality. The Standard & Poor’s report praised both North Las Vegas’ residential and business growth as well as officials’ efforts to streamline and reduce public expenditures.
Mayor John Lee weaned North Las Vegas off drawing from its utilities fund to pay for expenditures in its general fund, city spokeswoman Delen Goldberg said. Thanks to legislation at both the state and local levels, the general fund will be completely independent of the utilities fund by next year — recent ordinances prevent the city from drawing on its utilities fund for anything other than utilities expenditures in the future — and the city’s $601 million budget in 2018 will be balanced for the first time in more than five years.
Lee’s decision to remain as mayor instead of running for Congress contributed to the city’s perceived stability, the report said.
Knauss said the exact tax savings for residents will be determined as the city’s debt is refinanced and its interest rates on that debt are lowered. As of May 11, North Las Vegas had not yet had any of its debt refinanced.
In a 2017 evaluation, North Las Vegas received a BB+ rating, meaning Standard & Poor’s found the city was “vulnerable” but had the capacity to meet its financial commitments. But adverse business, financial or economic conditions would likely impair the city’s capacity or willingness to meet those financial commitments.
The BBB rating, the lowest of “investment grade” ratings, means Standard & Poor’s believed North Las Vegas is worth investing in and has “adequate” capacity to meet financial commitments. However, adverse economic conditions or changing circumstances could lead to a lessened capacity to meet those commitments.
Companies like Amazon, Tesla, Cisco, the Honest Company and sports retailer Fanatics have helped business in North Las Vegas boom over the past five years — adding thousands of jobs since Lee took over in July 2013. “It’s just a stronger city all around,” Goldberg said. “North Las Vegas has improved in just about every way possible.”
With the potentially lowered interest rates, Knauss said the city will aim to invest more in public services and infrastructure. Both Knauss and Goldberg said further improvement for next year’s review is another goal.
“Our goal is AAA status, if possible, due to the intrinsic savings associated with better credit ratings,” Goldberg said. “The mayor and city council’s goal is to create infrastructure for the city, create jobs and make North Las Vegas a better place.”
Las Vegas received a credit rating of AA in its last Standard & Poor’s evaluation, per city spokesman Jace Radke, meaning the city has a “very strong” capacity to meet its financial commitments. With a rating of AA+, Henderson’s bonds were rated the most reliable in the Valley, according to spokesman David Cherry.