The city of Sparks in northwestern Nevada was upgraded Friday by Moody’s Investors Service to its issuer rating and debt rating on a special district bond that will fund development of shopping, retail and entertainment districts.
Sparks, a population of 103,230 located in Washoe County adjacent to Reno, was upgraded by Moody’s from A2 to A1 and its special tax rate was upgraded from Ba2 to Ba1.
Issuer ratings reflect the city’s ability to repay its debt and debt-like obligations without regard to collateral, guarantees, or structural features. The rating action concludes a review that began on November 3, coinciding with the US city and county methodology release, according to the rating agency.
Outlets at Legends
Special District valuation gains impacted Sparks Tourism Improvement District No. 1 Series 2019A Bonds. The outlook for TID bonds was also revised to positive from under review. Moody’s did not assign outlooks for cities, saying they do not typically provide outlooks for local governments with such small debts.
“The positive outlook for the tax special rating reflects expectations that promised sales tax revenues will continue to grow at a healthy pace in the near term, supporting improvement in maximum annual debt service payments,” the analysts said. writing.
The City has outstanding debt of approximately $92 million as of June 30, 2022. Moody’s said it will now rate the sales tax bonds under the City of Sparks, not the Sparks Tourism Improvement District District 1.
A special district bond, called a STAR bond, was originally issued to support the development of Outlets at Legends, which will feature a baseball stadium, casino, hotel and outdoor shopping center. Backed by Scheels All Sports, Target, and Lowe’s, the shopping center was completed in the early 2010s, excluding major features such as baseball fields, IMAX, and casinos.
Since then, some of the other parts have been added slowly: the IMAX theater was completed in 2014, and the casino opened last summer.
The STAR Bond story is a story of redemption. The Outlets at Legends project was in full steam ahead of construction until the economy collapsed in 2008 and all the wheels fell off. The developer, Kansas City-based RED Development, has filed for strategic default on a $141 million private loan and received a default notice on bonds that were supposed to pay part of the 148-acre project. submitted. His $115 million STAR bond allowed the developer to use his 75% of the sales tax incurred to pay for development costs.
When Red Development defaulted on its STAR bonds in 2012, the rating plummeted to B2 with a negative outlook. With default probable gone, the rating agency upgraded the rating to B1 in June 2014, giving the bond a stable outlook, according to the rating agency.
When the district was upgraded from B1 to Ba3 in 2017, then-Moody’s analyst Pat Liberatore told bond buyers that the project “didn’t materialize as planned,” and the rating history reflects that. I was challenged. Mostly due to the recession. Liberatore said the developer was finalizing plans for the project in 2008, just as the economic crisis hit.
According to its ratings report, the 2017 Ba3 rating upgrade meant the bond was no longer in danger of default. Sparks’ Special Improvement District has never been rated investment grade by Moody’s. The rating agency began rating bonds at Ba2 in 2008. The rating was downgraded to Ba3 in December 2009 and to B2 in December 2011. In June 2014 the bond was upgraded to B1 with a stable outlook.
The city’s improved rating “reflects the city’s economic growth and continued improvement in average resident income levels, which is underpinned by continued economic diversification away from the tourism and gambling industries. The ratings further reflect recent improvements in cash balances and liquidity ratios resulting from strong consolidated tax revenues, which Moody’s report found moderate leverage and fixed cost ratios, as well as an exit from the pandemic. Is required.