| April 3
April 3 The city of North Las Vegas is nearing
insolvency and could default on some of its $436 million of
outstanding debt, Fitch Ratings warned on Thursday.
The recession-ravaged city of 223,500 people has until April
15 to cobble together a balanced budget under state law.
City Councilman Wade W. Wagner is "cautiously optimistic"
that North Las Vegas will pass a balanced budget, he told
Reuters. Failing to do so is one of the triggers for the state
to take control of the city, although the state has not said it
intends to do that. Nevada does not let its cities file for
Chapter 9 bankruptcy.
North Las Vegas, located less than 10 miles from the Las
Vegas Strip, has cut its employee count in half since 2009 to
about 1,100 workers. The city also recently let go of a handful
of department directors, Wagner said.
North Las Vegas has suffered two bruising court losses this
year, and it is struggling to cope with an estimated $18 million
budget gap, or about 15 percent of its spending, Fitch said. All
three rating agencies have dropped the city's general obligation
bonds to junk. Fitch rates the city's debt a "B" with a negative
outlook, indicating a material risk of default on its bonds.
On March 21, the Nevada Supreme Court rejected an appeal by
the city to throw out a $4 million award to a landowner in a
soured redevelopment deal.
In January, a district court ruled that the city could not
freeze $25 million in union employee pay raises.
On Wednesday night, the North Las Vegas City Council
proposed a $7.7 million settlement with its unions that Wagner
said the city put together by "literally scraping the last bit
of batter out of the cake dish." The proposal is made up of
consolidated tax funds, monies from the court system and savings
from employee attrition, among other sources, he said.
Settling with its public employees is the final step toward
balancing its budget, Wagner said. The city did not have a
reserve fund set aside for settlement.
"If we can do this, we don't have to do anything else for at
least a year, or possibly two," Wagner said.
Under Nevada state law, the city could be put into
receivership if it fails to close its budget gap or successfully
negotiate the settlement with its unions. The Nevada Tax
Commission could also ask voters to approve disincorporation.
Payments to bondholders could be at risk in either scenario,
While the state has provided some financial guidance to
North Las Vegas, it has not broadcast any plans to take over the
municipality, the credit rating agency said.
About $292 million of the city's debt, or more than half of
the city's outstanding $436 million of limited tax general
obligation bonds, is secured by revenues from water and
The utilities pay about $23 million a year in debt service,
according to Fitch. The city's general fund now has $9 million
in reserves, down from $45 million in 2008.
(Editing by Jan Paschal)